text:
    People of the State of Illinois ex rel. Edward J. Barrett, Plaintiff, v. Halsted Street State Bank, Defendant. Charles S. Deneen and Roy Massena, Appellees, v. Charles H. Albers, Appellant.
    Gen. No. 39,642.

      Opinion filed May 3, 1938.
    Rehearing denied May 17, 1938.
    George F. Barry, of Chicago, for appellant; Francis L. Brinkman and William J. McGah, both of Chicago, of counsel.
    Donald N. Schaffer, of Chicago, for appellees.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

Charles 8. Deneen and Boy Massena, copartners under the name of Deneen, Healy & Lee, filed an intervening* petition in the dissolution proceeding, People ex rel. Barrett, auditor of Public Accounts, v. Halsted Street State Bank, seeking allowance of a claim against the estate of the bank, then in the hands of William L. 0 ’Connell, as receiver, for legal services rendered in connection with reopening the bank or for the reorganization thereof. The receiver answered the petition and the cause was referred to a master in chancery, who recommended the allowance of a common claim against the receivership estate for $7,831.92 and costs. The receiver’s exceptions to the master’s report were overruled, and a decree was entered in accordance with the master’s recommendations, from which the receiver, respondent to the petition, appeals.

From the evidence adduced before the master it appears that on March 6, 1933, under presidential proclamation, a bank holiday was declared throughout the United States, and the Halsted Street State Bank was closed along with all other banking institutions, and its ordinary banking transactions were thereby suspended. This proclamation was continued in effect until a further proclamation was promulgated by the President of the United States on March 10, 1933, providing in effect that the appropriate authority having immediate supervision of banks in each State or place subject to the jurisdiction of the United States, should be empowered, under such regulations as might be prescribed, to permit any banking institution to perform any and all of their usual banking functions. Pursuant to these proclamations the auditor of public accounts of this state placed a representative on the premises of the Halsted Street State Bank. Shortly thereafter the auditor of public accounts determined that the stockholders of the bank would be required to contribute an additional $300,000 in cash in order to reopen the bank on an unrestricted basis. The officers and directors discussed the matter and felt that it was impossible to raise so large an amount in cash. Accordingly, a plan was conceived for organizing a national bank to take over the assets, assume a percentage of the deposit liabilities of the State bank, and secure waivers for the remaining deposits. For the purpose of considering this proposition, a meeting of the board of directors was regularly called and duly held in the offices of the bank Saturday, April 22, 1933, at which all the directors of the bank were present. Henry F. Eidmann, president and director, outlined the proposal as a basis for the discussion that ensued, and it was suggested that Charles S. Deneen, because of his experience in banking matters and his connections in Washington, would be more helpful than any man available in procuring a national banking’ charter, and in helping to effect the proposed reorganization. Thereupon Mr. John E. Traeger, one of the directors, suggested the employment of Mr. Deneen for that purpose, and a resolution, was adopted by the unanimous vote of all the directors that Mr. Deneen and Roy Massena, his associate, constituting the law firm of Deneen, Healy & Lee, be retained to render services in connection with the reopening of the bank or for the reorganization thereof. No minutes of this meeting were written up, because the minute book of the bank was then in the custody of the auditor’s representative.

May 12, 1933, Herbert W. Eidmann, vice president, and Henry Kloese, cashier of the bank, called on Mr. Deneen and retained his services. It was agreed that the employment should be on a per diem basis, and the amount of compensation was neither fixed nor contingent. Pursuant to the employment petitioners took steps to complete the organization of a new national bank to take over the bank building and certain assets of the State bank, and to assume 50 per cent of the deposit liabilities thereof. Although the evidence as .to the services rendered is not disputed, petitioners’ testimony as to the nature of the services rendered and the time expended was corroborated not only by the bank’s officers but also by. Paul R. Wilkinson, the auditor’s representative, with whom most of the negotiations with that office were conducted. They are set forth in detail in a statement which was attached to the petition and admitted in evidence, and may be briefly summarized as follows: Mr. Deneen made two trips to Washington in connection with the proposed reorganization, after the request for a conversion of the bank to a national bank had been denied. He had conferences with officials of the treasury department and the comptroller’s office, and was assured that a national bank charter could be secured. He also had conferences with officials of the Reconstruction Finance Corporation, resulting in an agreement to increase the R. F. C. loan at the bank from $120,000 to $180,000. The total amount of time consumed for services in Washington aggregated 6% days. In connection with the plan, petitioners had numerous conferences with representatives of the auditor of public accounts in this State concerning the details of the plan, the assets to be taken over, the valuation of the bank building, discussion of proposed contracts, and the question of the liquidation or purchase of certain municipal bonds. Twenty-seven such conferences are itemized in petitioners’ statement and incorporated in the record. There were also conferences with the chief national bank examiner in Chicago, at which were discussed details of the contract to be entered into between the State bank and the new national bank, the assets to be taken over, the methods of protecting the waived deposits, and the requirements of the treasury department and of the R. F. C. with reference to the bank’s loan. Numerous agreements were drawn by petitioners at the suggestion of these various officials, and redrafted from time to time to comply with their requirements. The total time necessarily consumed for these services, from May 12, 1933, to December 19, 1933, when the receiver was appointed, aggregated 295% hours, or 49% days, for which petitioners claimed the aggregate sum of $9,012.50. Subsequent to the appointment of the receiver, petitioners rendered further services in connection with the auditor’s proposal to reorganize the bank by assessing the stockholders, by appearance in the dissolution proceeding’s, and in connection with a proceeding filed in the circuit court of Sangamon county, Illinois, to restrain the auditor from further proceedings against the bank, and in an interpleader suit filed by the Aetna Casualty Company, wherein the bank was made a party. These services, rendered from December 20, 1933, to September 8, 1934, consumed 79 hours, or 13 1/6 days, for which petitioners claimed the aggregate sum of $1,975. The master found that the fair and reasonable value of the services rendered by petitioners was $150 a day for services rendered in Chicago, and $250 for services outside the city, recommended an allowance of $7,831.92, and $154.25 as costs, and the decree awarded petitioners these respective sums.

It appears from the evidence that the proposed plan of reorganization was agreeable to the national bank examiner and the State auditor, and both of these officials and other governmental supervising* agencies cooperated with petitioners and the officers and directors of the bank in making the plan effective. However, the plan failed of consummation only because of a decline in the securities market during the summer of 1933, making it impossible to comply with the requirements of the banking officials, and was ultimately abandoned December 18, 1933, and a receiver was appointed the following day.

It is first urged by the receiver that petitioners were not acting as attorneys for the Halsted Street State Bank, but for a reorganization committee and for the officers and stockholders of the bank, who were interested in “saving their jobs” and salvaging part of their stock investment and who incidentally were anxious to avoid their statutory and constitutional stock liability for an additional 100 per cent assessment. The evidence discloses that at the date of the employment of petitioners there was in existence a committee, consisting of certain officers and directors of the bank, known as “an organization committee for the South Town National Bank.” This committee was formed about April 15, 1933, and functioned until the appointment of the receiver in December, 1933. The principal function of this committee was to solicit subscriptions to the stock of the proposed new bank. It is inferentially argued by counsel for the receiver that petitioners were retained by this organization committee, and not by the bank. However, the evidence clearly indicates that petitioners were employed pursuant to a resolution adopted by the unanimous vote of all the directors, at a regularly called meeting held April 22, 1933. Three of the seven directors of the bank and two of its officers testified concerning the adoption of this resolution, the master so found, and there is no evidence to the contrary. Moreover, it appears that the director who suggested petitioners’ employment and made the motion for that purpose was John E. Traeger, not a member of the organization committee. The implication of the receiver that the directors of the bank were motivated only by the fact that they desired to save their “jobs” and avoid the statutory liability as stockholders is wholly without foundation. Only 50 per cent of the bank’s deposits were to be assumed by the national bank, and since there is nothing in any of the contracts providing for the release of the liability of stockholders as to the unwaived deposits, it is apparent that the stockholders would not be released as to the balance. Furthermore, the officers and directors were large stockholders of the bank. Five of the principal directors held 645 shares of the 2,000 shares of stock, and in connection with the auditor’s plan for an assessment against the stockholders these directors had agreed to pay such assessment, which in their case would have amounted to a substantial sum. These directors had also subscribed for a substantial amount of the stock of the new national bank, and were apparently willing to use their own resources to the extent of their ability in order that the bank might continue to operate and thus help its creditors to immediately realize a large part of their deposits.

The receiver questions the good faith of petitioners, as well as the bank officers and directors, in attempting to reorganize the bank. It is argued that the creditors were the real persons in interest when the bank was closed; that the bank could not pay its depositors, and was therefore insolvent; that this was known to everyone, including petitioners and the officers and directors. Eelating to the question of insolvency, it appears from an examination made by the State auditor March 23, 1933, that the bank’s total assets amounted to $1,631,047.73 (including $105,282.43 in cash and due from banks, $79,253.59 in United States bonds, $679,945.68 in other bonds, and $542,085.33 in loans on real estate and other securities). The books of the bank showed total liabilities (exclusive of capital stock, surplus and undivided profits) of $1,294,967.42 (including deposit liabilities of $1,074,376.65, and bills payable of $121,500). Included in the total liabilities was a reserve for bond depreciation, amounting to $62,088.07. The capital stock of the bank was $200,000, the surplus fund $100,000, and the undivided profits $36,080.31. Thus the bank’s books disclosed assets amounting to $398,168.38 in excess of its liabilities, and although the auditor’s examination made no finding of insolvency he determined that the bank’s books did not reflect the true value of its assets, that the capital stock was impaired, and that the business of the bank was being conducted with an insufficient portion of its assets in cash or readily convertible securities. This impairment of the capital stock and depreciation in assets was due primarily to a decline in the securities market and the general economic conditions prevailing at that time, and the State auditor’s requirements of $300,000 additional cash for the reopening of the bank on an unrestricted basis was not predicated on the bank’s insolvency, but to replace assets of doubtful value. From the auditor’s report it appears that the actual value of the assets at that time, taking into account the additional $300,000 required, exceeded the liabilities by almost $100,000.

The courts of this State have heretofore had occasion to discuss and define what constitutes the insolvency of a bank. In People v. Clark, 329 Ill. 104, the Supreme Court held that a bank is insolvent (p. 113) “when the cash value of its assets realizable in a reasonable time, in case of liquidation by its proprietors, as ordinarily prudent persons will generally close up their business, is not equal to its liabilities exclusive of stock liabilities.” (Italics ours.)

In People v. Gould, 345 Ill. 288, it was held that the impairment of the capital of a bank did not necessarily mean insolvency, and that in the determination of that question the original amount of the capital stock, the surplus and the undivided profits should be deducted from the total liabilities. The same rule was announced in People v. First State Bank, 274 Ill. App. 46.

Applying these decisions to the financial condition of the bank as hereinbefore summarized, it appears that the liabilities of the bank, as of March 23,1933, amounted to $1,294,967.42, as against assets of $1,631,047.73, or an excess of assets over liabilities of $398,168.38. The condition of the bank at the time of the moratorium is best indicated by the attitude of the auditor of public accounts, who, although he found a depreciation of assets and an impairment of capital, did not assume control of the bank pursuant to the Banking Act until six months later, and the receiver was not actually appointed until December 19,1933, which was nine months after the auditor’s examination was made, and during all this period the auditor cooperated with the officers and directors of the bank in their plans to reorganize. In view of these circumstances, it is idle to argue that the services rendered by petitioners and the desire of the directors and officers to reorganize the bank were not actuated by the utmost good faith. If the plan of reorganization had been consummated, the creditors, as well as the directors and stockholders of the bank, would have been benefited thereby.

In a supplemental brief filed by the receiver since this cause was heard on oral argument, it is urged that attorneys’ fees are not allowable from funds in the hands of a receiver unless such services aided in creating, preserving and protecting the fund. This proposition is not advanced as a defense in the receiver’s answer, nor was it urged before the master or chancellor on exceptions to the master’s report. The appeal is prosecuted from an order allowing a claim against the estate of the bank in the hands of the receiver, payable in due course of administration with all other claims against the bank, and should not be confused with claims against funds in the hands of a receiver, such as the expense of administration and fees for services rendered directly to the receiver in creating or preserving funds in his hands. The latter class of cases is governed by general equitable principles which favor the compensation of services for attorneys which have resulted in a benefit to a class by reason of a fund created or a fund preserved or protected for the benefit of all the beneficiaries. These services were rendered to the corporation and not for the benefit of a class having claims against funds in the hands of the receiver, and except for the fact that a liquidation proceeding was pending when the intervening petition was filed, petitioners mig*ht just as well have filed a suit at law against the receiver, with the permission of the court having jurisdiction of the dissolution suit. Under the circumstances, this claim is one at law, and is not governed by equitable principles, as the receiver contends.

It is next urged that the act of the directors authorizing the services to organize the new national bank was ultra vires the powers of the corporation and void. In this connection counsel for petitioners call our attention to the fact that in the receiver’s answer to the petition, the only questions raised were, first, a denial that petitioners were employed by resolution of the board of directors of the bank, and second, that the officers and directors of the bank were without authority to employ petitioners, because at the time of the appointment and during the period of their services the bank was in the hands of the State auditor and subsequently in the possession of the receiver. When the evidence adduced before the master conclusively showed that petitioners were employed by the bank pursuant to a resolution of its board of directors, the first defense became untenable, and the receiver then argued the second proposition before the chancellor. This defense likewise failed, because the law is clearly to the effect that the filing of a dissolution proceeding and even the appointment of a receiver does not ipso facto dissolve a corporation or completely restrict its corporate functions (People ex rel. Barrett v. West Side T. & S. Bank, 362 Ill. 607, 616), and the receiver now concedes that to be the rule of law for he says in his brief: “We agree that under the law, the appointment of a receiver does not automatically dissolve a corporation, or completely restrict its function as a corporation. ’ ’

As a result of the failure of these two defenses the receiver now takes the position that the steps taken to organize a national bank to take over the business of the State bank was not a reorganization, but his answer seems to be in conflict with this contention for he avers: “This respondent states that the reopening of the Halsted Street State Bank contemplated the organization of a new bank, to be known as the South Town National Bank, which new bank was to take over the assets of the Halsted Street State Bank. ...” The word “reorganization,” as applied to corporations, is defined in 8 Thompson on Corporations (3rd Ed.), p. 4, as follows: “Reorganization simply means the act or process of organizing again or anew. In the law of corporations, it means only what the term itself indicates, that a corporation has by some process organized anew; and yet it implies that some of the features of the old corporation are retained. ... A reorganization is usually effected by the dissolution of one and the organization of a new corporation to take the property and franchise of the first and to continue its business.” Under the plan for which petitioners rendered legal services the reorganization of the State bank was to be effected by the creation of a new bank to continue the business of the old one by taking over the bank building and part of its assets in exchange for an assumption of part of its liabilities. Apparently everybody, including the State auditor, treated it as a reorganization. Mr. Wilkinson of the auditor’s office testified that, “the question of fees and expenses in connection with the reorganization was discussed during the conferences, ’ ’ and when the auditor submitted a proposal to the depositors for a reorganization by assessing the stockholders, in March, 1934, he stated in his memorandum that waivers of deposits had already been obtained, “in connection with the previous reorganization plan.”

Be organizations of the ¿ature here contemplated have been recognized by the courts in this State. The power of a bank to reorganize by entering into a contract with another bank to assume its liabilities and take over its assets was considered and approved in Sherrard State Bank v. Vernon, 243 Ill. App. 122, and People v. Sherrard State Bank, 258 Ill. App. 168, and petitioners’ counsel say that this method of reorganization became so common, especially during the period of depression, that the legislature deemed it desirable to give it express recognition in order that the State auditor might be given supervisory powers over such reorganizations, and accordingly passed an act in 1929 which was ratified by referendum November 4, 1930 (ch. 16½, sec. 12, p. 194, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 10.13]). Furthermore, the Banking Act imposes the duty upon the State auditor of assuming control of a bank “for the purpose of reorganization or liquidation through receivership, ’ ’ and before he is authorized to appoint a receiver he must determine that the bank cannot reorganize. (Ch. 16½, sec. 11, p. 191, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 10.11].) Manifestly, the auditor cannot undertake proceedings necessary to reorganize a bank. If a reorganization is to be effected it can be done only by the bank, acting through its officers and directors in cooperation with the State banking authorities.

In support of the receiver’s argument that the act of the directors authorizing the services of petitioners to organize the new national bank was ultra vires the corporation and void, his counsel say that they have searched diligently for precedent where the question was considered whether the receiver of an old, insolvent bank is liable for attorneys’ fees where an unsuccessful attempt is made to organize a new corporation to take over some of the assets and liabilities of the old, but have found no such cases. However, counsel cite Assets Realization Co. v. Defrees, Brace & Ritter, 225 Ill. 508. This case was originally cited by counsel for petitioners before the chancellor for the purpose of showing that even after the appointment of a receiver for a corporation under the supervision of the State auditor, a corporation has authority in law to employ counsel to resist such receivership] and that, even though efforts in that respect are unsuccessful, compensation for services, if rendered in good faith, is payable out of the receivership estate. That decision does not support the contention that the proposed reorganization of this bank was ultra vires. People v. Commercial Alliance Life Ins. Co., 148 N. Y. 563, and Witherspoon v. Hornbein, 70 Col. 1, are also cited under this point, but it appears that in both of those cases attorneys’ fees were denied because the facts showed that the services were rendered in defense of unlawful acts of officers and directors, rather than to preserve the corporate existence.

Lastly, it is urged as ground for reversal that the claim of petitioners for attorneys’ fees “is outside the jurisdiction of the court.” It must be conceded, of course, that under sec. 11, ch. 16½, Banking Act (Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 10.11]), the court had jurisdiction of the subject matter, but the receiver argues that only claims in existence when the bank closed may be filed in the dissolution proceeding. This contention is answered in People v. West Side T. & S. Bank, 362 Ill. 607, where, after citing the fact that the auditor and receiver had availed themselves of the processes of the court in the dissolution case, the court said (p. 618): “We find no language in section 11 which can be distorted to mean that the orderly dispatch of the business of courts should be upset by requiring the services of other courts for purposes that can be performed by the one. The court in charge of the liquidation of a bank is not a mere conduit for the benefit of the receiver.” It would appear that a claim for services in connection with the reorganization of a bank, rendered prior to the appointment of a receiver, if it may be allowed at all, is such a claim as comes within the contemplation of the Banking Act. Most of the services in the case at bar were rendered prior to the appointment of the receiver, and under the authority of the Defrees case, supra, services rendered after the appointment of the receiver, in resisting the receivership, may be proper claims against the receivership estate.

In connection with his first point, the receiver contends that the services rendered by petitioners subsequent to the appointment of the receiver were not covered by the resolution of the directors, which pertained only to the reorganization into a national bank. The evidence discloses that these services constituted a small portion of the aggregate services rendered by petitioners, and the value was slightly less than $2,000. On the basis of the rate of compensation found by the master to be reasonable, the claim as allowed for $7,831.92 is less than the total value of the services rendered prior to the appointment of the receiver. Furthermore, it clearly appears from the record that these services were rendered at the direction of the bank’s officers and consisted principally of the filing of the appearance of the bank in the dissolution suit, appearances in the dissolution cases in response to a notice served upon petitioners by receiver, the preparation and filing of the complaint in the Sangamon county court against the State auditor, and the filing of an answer in the Aetna Casualty Company inter-pleader suit.

From an examination of the evidence, it appears that the State auditor knew that petitioners had been retained, and was fully advised of the steps taken in the proposed reorganization. The services were rendered in the utmost good faith, and there is no countervailing evidence to rebut the extent or reasonableness of the services rendered. We are of the opinion that petitioners’ claim was properly allowed and the decree of the superior court is therefore affirmed.

Decree affirmed.

Scanlan and Sullivan, JJ., concur.


source: Caselaw Access Project

author: Mr. Presiding Justice Friend

license: Public Domain

text:
    Maurice Klein, Trustee in Bankruptcy of Walter V. Fackler, Appellant, v. Chicago Title and Trust Company, Appellee.
    Gen. No. 39,651.

      Opinion filed May 3, 1938.
    John A. Brown, Ross Langdon and Dale A. Letts, all of Chicago, for appellant.
    George Gillette, Elmer M. Leesman and John Mann, all of Chicago, for appellee.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

Walter V. Faclder filed a complaint in the circuit court against Chicago Title & Trust Company seeking discovery and an accounting against defendant under an alleged constructive trust. Shortly thereafter an involuntary petition in bankruptcy was filed against him in the United States District Court, and he was adjudicated a bankrupt. Thereupon, Maurice Klein, who was appointed trustee of Fackler’s estate, procured an order in the district court allowing him to be substituted as complainant in this proceeding, and the cause has since been carried on by the trustee. Defendant’s motion to dismiss the complaint was allowed by the chancellor, the bill dismissed for want of equity and Klein, as trustee in bankruptcy, prosecutes this appeal.

The complaint, which is quite voluminuous, may be summarized as follows: Fackler, a lawyer admitted to the Illinois bar in 1917, became a salaried employee of Chicago Title & Trust Company in 1925, and continued in its employ until June, 1932. Chicago Title & Trust Company is alleged to be a corporation, chartered to engage in, among other things, the guaranteeing of titles, to act as escrowe, assignee and depositary, and to accept and execute any and all trusts.

During the period of his employment Fadder was assigned to two different departments of defendant corporation; first, to the guaranty department, and afterward, in January, 1928, to the company’s legal department. "While employed in the guaranty department he was engaged in examining titles and furnishing legal opinions thereon to the general public, for which defendant charged and was paid attorneys’ fees.

In January, 1928, he ceased to work in the guaranty department and was assigned to the law department where his activities are alleged to have included (1) the making and furnishing to the public, which was charged and paid defendant corporation fees for legal opinions upon all subjects; (2) furnishing opinions and giving legal advice to the paying public in the prosecution or defense of suits at law or in equity; and (3) conducting and carrying on chancery litigation, and furnishing legal services to the public. Upon his transfer to the legal department he assumed complete charge of the foregoing activities, and “created, drew and established the legal forms, precedents, practice and procedure” used in proceedings conducted through that department.

It is alleged that while employed in the law department certain suits were instituted for the foreclosure of mortgage trust deeds, in which defendant corporation was either trustee or successor trustee; that in these suits defendant in its capacity as trustee was the complainant; that various attorneys and solicitors were retained to represent the complainant trustee in these suits, and that Fackler, as a member of the law department, frequently entered his appearance with other attorneys whom he advised and assisted in the preparation of these foreclosures and followed the proceedings; that the decrees thereafter entered in these cases fixed certain sums as allowances to complainant trustee to recover expenses incurred by it for solicitors’ fees, and it is charged that any such allowance collected by defendant or “by it collected and by it distributed as attorneys’ and solicitors’ fees to various or other attorneys and solicitors in such cases . . . belong of right to your orator.”

It is alleged that the legal work relating to the foreclosure of bonds and trust deeds and the handling of matters and details in connection therewith, and especially in connection with the appointment and work of bondholders’ committees, were during the time of Fackler’s employment by defendant turned over by it to him for the performance of legal services in all or most instances in substantially the following manner or under the following circumstances: Upon the appointment or creation of a bondholders’ committee, defendant or some of its officers appointed an attorney for the committee, who thereafter made a demand upon the trustee, usually the defendant, to accelerate the maturity of the bonds secured by the trust deed, and after such demand the committee or its attorney requested defendant, as trustee, to file foreclosure proceedings; that thereafter bills to foreclose were prepared and filed, by or under Fackler’s orders and directions; that it was one of Fackler’s duties, whenever possible, to secure the appointment of defendant as receiver in these various foreclosure proceedings, to procure orders of court for the appointment of attorneys and solicitors for the receiver and to secure the recommendations of masters and allowance by courts for solicitors’ and receivers’ fees, as well as fees for the services of defendant as trustee or successor trustee; and that all bills for foreclosure of bond or note issues were when drawn submitted to Fackler for his examination and approval before they were filed; that he made examinations and rendered legal opinions, approval and corrections, as an attorney at law, on matters so submitted to him; that he signed various bills to foreclose as attorney and solicitor of record for defendant, along with other attorneys retained by defendant, attended court hearings and represented defendant as complainant on motions presented by him in court from time to time; that he attended the foreclosure sales, made bids on behalf of bondholders in the name of defendant, as trustee, drafted the forms and reports of sales used by the masters and their reports of sales and distribution to the courts in these various proceedings, examined and passed upon the legality and propriety of those reports, and gave legal opinions and approved the accounts and orders of distribution, testified in various proceedings on behalf of the bondholders’ committees with reference to the reasonable value of solicitors’ fees and procured the findings of the masters and approval of their reports by the courts to such sums as were found to be due and decreed to defendant for its solicitors’ fees; that such work as he performed as an attorney at law and solicitor required the time, legal ability, skill and attention of an attorney; that defendant furnished him desk room without charge and paid him a salary for services other than legal services on behalf of defendant; that securing Fackler’s services to conduct or carry on such litigation was within the corporate powers of defendant, but that joining another attorney or attorneys, designated by it as solicitors for or to represent the bondholders’ committees as solicitors for the complainant with Fackler, was illegal and fraudulent and contrary to the legal purposes and objects for which it was incorporated and contrary to public policy.

Complainant sets forth sec. 1, ch. 13, Smith-Hurd Ill. Stat. 1933 [Cahill’s Ill. St. 1933, ch. 13, ¶ 1], relating to the provisions of the statute mailing it unlawful for one to practice law without a license and makes reference to other statutes prohibiting corporations from practicing law, and alleges that defendant, either individually or as trustee, never was, could not be, and is not licensed or qualified to be licensed to practice law or act as an attorney or counsellor at law or to collect the fees or emoluments payable for legal services, or by its charter authorized or empowered to receive fees for any services by it rendered as an attorney or counsellor at law; that the advice, opinions and service rendered by Fackler as attorney on behalf of defendant, as well as for the various committees created under defendant’s direction, were services of an attorney licensed in accordance with the laws of Illinois and as such he is entitled to receive and be paid the sums of money allowed in the various cases and proceedings for services rendered by him to defendant, as complainant, without any deduction or split from his fees; that he is likewise entitled to have his solicitor ’s fees, which were allowed by the courts to defendant for its solicitors’ fees, and that it was and is illegal and against public policy for defendant to hold, claim or keep such fees or to make any disposition thereof other than by payment to Fackler.

It is alleged that in equity and good conscience defendant should be compelled to account to Fackler for all sums of money it received during all the time that he rendered services on behalf of defendant; that he did not keep any itemized statement of his charges, but he avers that upon a just and proper statement of account it will appear that defendant has received for his use and benefit, for opinions of title and legal services furnished by him as attorney at law upward of $500,000.

The complaint does not allege that, under his contract of employment with defendant, Fackler was to be paid any compensation or fees for any of the services mentioned, other than his usual salary, which he received regularly from defendant; nor does it allege the existence of any separate contract or contracts whereby he was to be entitled to receive from defendant, in addition to his usual salary, separate attorney’s fees in addition to those incurred by defendant to be paid by it to its outside counsel, who represented it as mortgage trustee in the foreclosure suits mentioned. It is not alleged that any such additional fees were ever allowed the defendant company in such foreclosure suits, to reimburse it for expenses incurred by it by reason of any services of members of its law department; nor is there an allegation of any contract or agreement between Fackler and defendant and other counsel for the division of fees between him and such other counsel.

Briefly summarized the gravamen of the complaint is that defendant corporation is charged with the unauthorized practice of law; that the various acts specified in the complaint were consummated through the instrumentality of plaintiff, a licensed attorney, that as a result of such unauthorized practice the defendant realized substantial profits; and that Fackler, notwithstanding the fact that he was the agency through which such unauthorized transactions are charged to have been consummated, is nevertheless entitled to seek the aid of the court to compel an accounting of the moneys and profits he claims resulted from these unauthorized transactions.

Chicago Title & Trust Company’s motion to dismiss the complaint, thereby challenging the sufficiency thereof, under the procedure prescribed by the Civil Practice Act, specifies nine separate reasons in support of the motion, among which are (1) that the complaint fails to set forth the terms and conditions of any contract entitling plaintiff to the attorney’s fees sought; (2) that it failed to allege any indebtedness due from the defendant to plaintiff; (3) that the allegations made, if true, showed Fackler’s participation in transactions in violation of law and against public policy; and (4) that if any contract had existed for the performance of services of the character alleged in the complaint and payment of compensation therefor, the contract would be illegal. Under the provisions of the Civil Practice Act a motion to dismiss takes the place of a demurrer as formerly employed. (Sec. 45, par. 169, ch. 110, Civil Practice Act, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 104.045].) It does not admit conclusions or inferences drawn by the pleader (Lietzman v. Radio Broadcasting Station W. C. F. L., 282 Ill. App. 203, 208), and under the authorities of this State pleadings are to be construed strictly against the plaintiff, except only as to matters of form, and the absence of material and essential allegations in the complaint may properly be raised by motions to dismiss. (Lewis v. Continental Assur. Co., 289 Ill. App. 114, 119.)

Although various reasons are urged for reversal of the judgment, the principal questions presented for determination are (1) whether Fackler is entitled to recover attorney’s fees upon the theory of a constructive trust in the absence of any allegations in the complaint showing that his claim is predicated upon any contract, express or implied, and (2) whether assuming the acts with which defendant is charged to have been unlawful and against public policy, a court will lend its aid to enable one party to the unlawful enterprise to compel an accounting from another party to such an enterprise of moneys or profits resulting therefrom.

Considering the first of these propositions the complaint, when reduced to its simplest terms, must be regarded as a suit seeking to recover attorney’s fees. Plaintiff’s counsel concede that “there is no averment in the complaint of a contract, and this suit is not based on a contract, but on a constructive trust, ’ ’ and in fact no attempt is made by plaintiff to allege a contract, express or implied, upon which any contractual relationship for services could be predicated. The question therefore arises whether, in the absence of an agreement, plaintiff is entitled to an accounting and to the recovery of fees. The law is well settled that an attorney’s lien for professional services must rest upon the terms of a contract of employment, either express or implied, made with the party sought to be charged. Although a lawyer is regarded as an officer of the court his fees are not fixed by statute and he is at full liberty to contract with those whom he represents in the matter of his fees or charges for professional services. The liability to pay for legal services stands upon precisely the same footing as other agreements. (Chicago & Southern Traction Co. v. Flaherty, 222 Ill. 67, 70.) There are cases holding in effect that corporations may be bound by contracts made by their agents though not under seal, and also on implied contracts to be deduced from corporate acts without either a vote or deed or writing (Kent’s Commentaries, vol. 2, sec. 291); also decisions holding that, “acquiescence by a client in his attorney’s conduct may supply the place of a request to act, provided the case was such that the client might reasonably know that he would be expected to pay for the service,” (6 Corpus Juris, § 301, p. 730); that it is not essential to the right of recovery by an attorney against his client for professional services that there should be shown an express request, but if the services were rendered under such circumstances as will reasonably imply they were performed with, the assent and upon the request of such a party, a recovery may be had. (Cooper & Moss v. Hamilton, 52 Ill. 119, 123.) But the doctrine enunciated by these authorities rests generally upon the theory of an implied agreement. In order to permit recovery for services in this case the complaint would necessarily have to allege some express or implied contract, or facts from which it could be reasonably inferred that defendant had obligated itself to compensate Fackler in addition to his regular salary as its employee. The bill is devoid of any allegations from which such an obligation might arise. The only contract plaintiff shows in his complaint is the contract of employment under which the relationship between Fackler and defendant had its inception, and although the terms of that agreement are not specifically set forth, the complaint clearly alleges that there was an express contract of employment which necessarily excludes the existence of an implied agreement. (Walker v. Brown, 28 Ill. 378.) It would seem to follow, therefore, that without some showing of an agreement between Fackler and defendant, whereby he was to become entitled to attorney’s fees other than his salary, he has not made out any claim of right to receive them and defendant cannot be said to have collected any moneys for Fackler’s use and benefit in the absence of averments of necessary facts to show that Fackler was entitled to such moneys. Plaintiff’s principal claim for an accounting is predicated upon fees allowed defendant in foreclosure proceedings to compensate it for expenses incurred in retaining outside counsel whom Fackler is alleged to have assisted in following these proceedings. In retaining outside counsel defendant incurred an obligation to pay them. Allowances of solicitors’ fees in foreclosure proceedings are made direct to the complainant and not to attorneys or for their use and benefit, and attorneys so retained have no interest in the fees awarded the complainant. (Montgomery v. Dime Savings & Trust Bank Co., 290 Ill. 407.) In that case it was held that where solicitors’ fees were allowed, whether by statute or otherwise, the allowance may be made only t.o a party or parties to the litigation and not to the solicitors performing the services, and Mr. Justice Cartwright pointed out that in a suit by a wife for separate maintenance the statute authorized the court to make an allowance to enable her to prosecute her suit, but an application for such allowance must be in her name and made to her and not to her solicitor. Consequently since outside attorneys who had a contract or implied agreement with defendant for fees could not fairly contend that the ■ money paid to Chicago Title & Trust Company was collected for their use and benefit, Fackler, who concedes there was no contract or agreement between him and defendant, cannot fairly claim that these fees were collected for his use and benefit.

Although it is conceded that complainant makes no allegations of an express or implied agreement for fees, he argues that he is entitled to recover from defendant on the theory of a constructive trust, based upon allegations that defendant violated the statute which makes unauthorized practice of law by a corporation a criminal offense; and he contends that defendant having derived profits from such unlawful practice became a constructive trustee for his benefit. The complaint alleges at great length that Fackler, a licensed attorney, was the agent and instrumentality through whom defendant was able to conduct and consummate its alleged unauthorized practice of law, and that Fackler not only participated therein but that he initiated, controlled and supervised the proceedings through which these fees were unlawfully paid to defendant. From this premise he alleges and in his brief argues that notwithstanding his own part in the transaction he is entitled to compel an accounting from the company of the profits of the unlawful enterprise and to have the court decree that he, rather than defendant, is entitled to such profits. Counsel for defendant say that it is embarrassing for them to treat as admitted, even though only for the limited purpose of testing the sufficiency of the complaint, “the scandalous and unlawful acts and improper conduct alleged in the complaint to have been done by the company through Fackler,” and they say that these charges, if true, would subject Fackler as well as defendant to prosecution under the following Illinois statute, which deals with unauthorized practice of law by corporations. (Ill. Rev. Stat. 1937, ch. 32, secs. 3 and 4 [§§ 413, 414; Jones Ill. Stats. Ann. 32.222, 32.223].) “Sec. 3. Any corporation violating the provisions of this act shall be liable to a fine of not more than five hundred dollars ($500), any (and) every officer, trustee, director, agent or employee of such corporation who directly or indirectly engages in any of the acts herein prohibited or assists such corporation to do any such prohibited act or acts is guilty of a misdemeanor and upon conviction shall pay a fine of not less than two hundred dollars ($200) or more than five hundred dollars ($500).

“Sec. 4. The fact that any such officer, trustee, agent or employee shall be a duly and regularly admitted attorney at law shall not be held to permit or allow any such corporation to do the acts prohibited herein, nor shall such fact constitute a defense upon the trial of any of the persons mentioned herein for a violation of the provisions of this act.”

Obviously any corporation engaging in unauthorized practice of law must of necessity do so through the agency of an attorney. This is clearly pointed out under the “Unauthorized Practice News” for April, 1935, issued by the American Bar Association Committee on Unauthorized Practice of Law, as follows: “ It has long been recognized by Unauthorized Practice and Ethics Committees of our various local and national bar associations that the unlawful practice of law in any degree substantially injurious to the public and the profession can exist only through participation of lawyers.” The impropriety of licensed attorneys, who, as employees of corporations, aid and assist in the unauthorized practice of law, has likewise been recognized by the courts. (In re Pace, 156 N. Y. Supp. 641; In re Otterness, 181 Minn. 254.)

As a result of the allegations of the complaint, it seems clear to us that Fackler has brought himself within the purview of the rule that a court will not aid one party to an unlawful transaction to compel another party thereto to account for moneys or profits alleged to have arisen out of such transactions. In Shaffner v. Pinchback, 133 Ill. 410, the court held that where persons engaged in an unlawful business so that they are in pari delicto the law will not assist either one, but will leave them where they have placed themselves. In Miller v. Davidson, 3 Gilm. (Ill.) 518, the court said (pp. 524, 525): “No principle is better settled, than that where two or more persons embark in an unlawful transaction, and one gets the advantage of the others, and appropriates more than his proportion of the spoils to himself, the Court will not interfere to make him divide with the others. As they commenced with a violation of the law, they cannot invoke its aid in any way. The law will not meddle with gains obtained by its own outrage, as between those who have been engaged in trampling it under foot.”

Plaintiff cites and discusses in his brief People v. Peoples Stock Yards State Bank, 344 Ill. 462, wherein upon an information filed a bank was found guilty of practicing law and was punished for contempt. The improper acts of the bank were consummated and carried out by certain attorneys employed by it. Plaintiff says that if in that case the attorneys who assisted the bank in doing the acts for which the bank was punished had brought suit to recover fees for their services, “there would have been equity in their bill,” and it is argued by plaintiff’s counsel that “that is the exact condition that we contend for in this case.” In advancing this contention counsel overlook the fact that these attorneys, whose conduct made it possible for the bank to violate the statutes and public policy of this State, were culpable in the eyes of the law equally with the corporation itself, and by engaging in and furthering the enterprise they made themselves guilty of a crime and subject to punishment. (Ill. Rev. Stat. 1937, ch. 32, secs. 3, 4, ¶¶ 413, 414 [Jones Ill. Stats. Ann. 32.222, 32.223].) Obviously if the attorneys involved in the Stock Yards Bank case had sought an accounting for the profits of their illegal enterprise there would have been no equity in their claim, but under the authorities hereinbefore cited the court would have left them where it found them — as participants in an unlawful enterprise.

This principle was expressly recognized in Midland Credit Adjustment Co. v. Donnelley, 219 Ill. App. 271, cited by plaintiff, where, in a suit for an accounting, the petition alleged that plaintiffs, a corporation and an attorney at law, .were employed to collect certain accounts, with or without legal proceedings, that the contract for services was joint and not severable, and stated a case wherein the corporation and the attorney were engaged in the practice of law and were attempting to evade the law, it was held that the bill was subject to demurrer since the contract was violative of public policy.

Plaintiff’s counsel cite and rely on Pitsch v. Continental & Commercial Nat. Bank, 305 Ill. 265, as affording a basis for recovery between parties who were in pari delicto. In that case Pitsch was a notary public employed by the Continental Bank from October, 1911, to December, 1918, under a contract by which he agreed to act as a notary public in the matter of protesting commercial paper whenever required by the bank. For these services he was to receive 12% per cent of all protest fees, the bank retaining the balance. This work required all his time, and was done on the premises of the bank, which furnished him with desk room, records, stationery, telephone service and everything used in his notarial work except his official seal. The bank collected all the fees for notarial services rendered, and twice a month made a settlement with Pitsch paying him 12% per cent of the fees collected. In 1919 he filed a bill seeking an accounting. As applicable to the question under consideration the Supreme Court held that a notary public is a public office, recognized by the commercial law of the world; that the fees of his office are fixed by statute; that his contract of employment required the rendering of official services, and that he rendered no other service; that a contract whereby a public officer, whose compensation is fixed by statute, agrees to accept for his official services something different than that provided by statute is contrary to public policy and void, and that his compensation as a public official for the performance of his official duties is not a matter of traffic or trade, for bargaining or for favoritism. One of the defenses there interposed was that Pitsch and the bank were in pari delicto, and that the law would not aid either but would leave them where it found them. The court held that the doctrine-did not apply, and said (p. 272) that “the test for determining whether or not the objection that the plaintiff and defendant were in pari delicto can be sustained is by considering whether the plaintiff can make out his case otherwise than through the medium and by the aid of the illegal transaction to which he was himself a party.” That case can readily be distinguished from this proceeding in the following respects: Fackler was not an officer with official duties or salary fixed by statute, but an attorney with authority to contract regarding fees or salary which he would require and accept for his professional services. Furthermore, there was nothing illegal or improper in the rendition of the services in the Pitsch case; the only respect in which public policy was there violated was in the agreement relative to the disposition of the fees. In this case Fackler claims fees for services, the very rendition of which is alleged to have been by violation of law, and the distinction between illegality in the rendition of services as compared with the illegality merely in the manner of their payment or in matters otherwise not affecting their rendition, is recognized in City of Rochester v. Campbell, 184 Ind. 421, and Barngrover v. Pettigrew, 128 Ia. 533.

Aside from the consideration that the illegal aspect of these transactions, as alleged, prevents any recovery thereon, the law is well settled that a constructive trust is created by operation of law, and allegations of fact requisite to show a constructive trust must be made in the complaint. Assuming that under the allegations of the bill, Fackler, as an attorney, subjected both himself and the company to a charge of violation of law, he was still fully responsible for his own acts, and no facts are alleged which tend to show that his conduct was the result of fraud, coercion or undue influence practiced upon him by the company. As attorney for defendant it was his duty to counsel and advise against the commission of unlawful acts rather than to carry out and consummate them (Ross v. Payson, 160 Ill. 349), and after his employment had terminated he cannot seek to turn his conduct to his own personal-advantage at the company’s expense. The courts have consistently held that a constructive trust arises through a species of fraud practiced by one party on another, and only where the innocent party is a victim of the other’s undue influence, but equity will not raise a trust, constructive or otherwise, for the benefit of one who seeks to establish the same by allegations of his own unlawful conduct. (Rosenbaum v. Huebner, 277 Ill. 360; Bogert, Trust and Trustees, vol. 3, sec. 472, p. 1461.) In Guatelli v. Brown, 84 N. J. Eq. 33, the court appropriately stated the rule as follows: “To transform so irregular and . . . reprehensible a transaction into a trust for . . . [plaintiff’s] benefit would not be doing equity. Trusts are often raised against those who participate in indefensible transactions, but not in their favor.”

We are of the opinion that the chancellor properly dismissed the complaint for want of equity. The decree of the circuit court is affirmed.

Decree affirmed.

Scanlan and Sullivan, JJ., concur.


text:
    Paul Campion, Appellee, v. Chicago Landscape Company, Appellant.
    Gen. No. 39,671.

      Opinion filed May 3, 1938.
    Robertson, Crowe and Spence, of Chicago, for appellant; Burt A. Crowe and Edmund L. McGibbon, of Chicago, of counsel.
    Royal W. Irwin, of Chicago, for appellee.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

Paul Campion, plaintiff, brought suit against Chicago Landscape Company for injuries sustained when he was struck in the eye by a ball while playing golf on the Garfield Park course in Chicago, which at' the time was being operated under a concession by defendant. The jury returned a verdict for $10,000, upon which judgment was entered. Defendant appeals.

The amended complaint charged that the accident was caused by the negligence of defendant in that it carelessly and negligently maintained the fairways of the sixth and seventh holes and laid them out and maintained the course so that players approaching the seventh green were unduly exposed to danger of being struck by balls driven with reasonable skill by other players from the sixth tee, and that defendant was careless and negligent in laying out and maintaining the sixth and seventh fairways in dangerous proximity to each other.

There is substantially no dispute as to the salient facts. Garfield Park in Chicago is under the jurisdiction of the West Park Commissioners, who had leased the nine-hole golf course to defendant May 13, 1933, for a period of one year. Although defendant had assumed the operation of the course, the upkeep thereof, such as the mowing of lawns and work of attending to the grounds, was retained by the West Park Commissioners. This course has been in existence for more than 25 years and was used for many years to play the Cook County Golf Association championships. During that time it has not been changed. The course consisting of nine holes having an aggregate length of 2,006 yards is laid out on a plot of ground about 30 acres in area. The terrain is practically level with shrubbery on some of the holes, mostly along the outer edge, and several wooded spots. Hole No. 6 runs north 283 yards and No. 7 runs back 291 yards in a slightly southwesterly direction. The accident occurred around noon Sunday, May 14, 1933, the day after defendant had taken over the concession. It was early in the season and the regular No. 7 green was not in use, but instead a temporary green had been laid out approximately in front of the regular seventh green and about five yards to the left. The distance from the center of the temporary green to the sixth tee was approximately 50 yards.

Campion was an experienced golfer who had played for more than 15 years and maintained an average score of about 80. He had played various public courses in this district, at numerous country clubs around Chicago and on various courses in Minnesota and Wisconsin. Although he lived near Garfield Park all his life he had never played over this course until the day in question.

Many people wore playing the course on the day of the accident. Plaintiff was paired up with his brother-in-law Edward Manahan. They had played and completed six holes and had driven from the seventh tee toward the green. The fairway on this hole was perfectly flat, with no bunkers, traps, mounds or trees. Four girls were playing ahead of plaintiff and as he stood on the seventh tee he had a clear view of the entire course. He drove down the seventh fairway, a distance of about 200 yards, to a point about 35 feet left of the normal center of the fairway. The average width of this fairway was about 40 or 45 yards and its course was slightly toward the southwest. After teeing off plaintiff and Manahan walked down the fairway and when plaintiff reached his ball he stood waiting for the foursome ahead to clear the seventh green. He testified: “I did not notice anybody playing off the sixth tee. [Although the uncontroverted evidence is that there were players in this tee while plaintiff awaited his turn to shoot.] I was rather concerned with the fact that these fairways were rather narrow. I knew that. I also knew that there might be boys and girls playing around there that afternoon who weren’t true and accurate drivers. I did not concern myself with the question of whether or not somebody driving somewhere near me in an opposite direction might hit me. I did not pay any attention to that. While I was standing there I was facing in a southwesterly direction. I was not looking at anything in particular. I was waiting for the green to clear. The green was almost due south of where I was. At my left and over still south of me was the sixth tee that I had just previously played from. I didn’t take any particular notice whether there was anybody on that tee driving or not. On a busy day like that there is always somebody on every tee. On a busy day when there are a lot of people playing I do not necessarily use more care in watching out for myself. I don’t know that there is any reason why I should.” While plaintiff was standing over his ball and waiting, one Smith and Harold Davis were driving from the sixth tee toward the sixth green. Smith hooked his ball so that it carried into the seventh fairway, where plaintiff stood, inflicting serious injury.

Defendant’s motions for a directed verdict made at the close of plaintiff’s case and again at the close of all the evidence were denied by the court and these rulings are assigned as error. The gist of the complaint is that it was negligence to lay out and maintain a golf course in such manner that there was a likelihood of injuring some person; that this course violated the well recognized rules of golf construction; and that the manner in which the 6th and 7th fairways were maintained was such that it must have been apparent to defendant that there was an undue hazard which should have been modified or eliminated.

As ground for reversal it is first urged that the proof fails to show defendant was guilty of the negligence charged in the complaint and that such alleged negligence as is charged was not the proximate cause of the accident; that the accident was due, not to the condition or layout of the golf course, but rather to the fact of Smith’s driving the golf ball from the sixth tee into the seventh fairway, where plaintiff was standing. The question whether the pleadings and facts. establish a case of liability against the proprietor of a daily fee course presents a novel point of law in this State.

It is a fundamental principle in our law that negligence is a breach of duty and where there is no duty dr breach there can be no negligence. (Kreigh v. Westinghouse, Church, Kerr & Co., 152 Fed. 120.) As applicable to this rule of law defendant cites a group of cases which hold, under pertinent facts, that if an injury has resulted in consequence of a certain wrongful act or omission, but only through or by means of some intervening cause, from which the injury followed as a direct and immediate consequence, the law will refer the damage to the last or proximate cause and refuse to trace it to that which was more remote. (Cooley on Torts, 3rd Ed., p. 99.) This principle was involved in Seith v. Commonwealth Electric Co., 241 Ill. 252, where a live wire had fallen from the defendant’s pol'e to the ground between the sidewalk and the curb. While there it was struck by a policeman with his club and accidentally thrown upon a person standing on the sidewalk. In holding that the negligent conduct of the defendant in so maintaining the wire that it could fall to the ground was not the proximate cause of the injury, the court said (p. 265): “The injury to the plaintiff followed as a direct and immediate consequence of the independent act of the policeman, and but for such act any negligence of the defendant would have caused no injury to the plaintiff. . . . The negligence of the defendant produced a condition which made the injury possible, but the injury would not have occurred but for the independent act of the policeman. ’ ’

In Crawford v. Central Illinois Public Service Co., 235 Ill. App. 339, the defendant was charged with negligence in setting a pole near to the curb line of a street. Plaintiff, in driving an automobile and endeavoring to avoid a collision in the street with another vehicle, ran over the curbing, struck the pole and was injured. The court pointed out that the three essential elements in actionable negligence are: (1) a duty imposed by law to exercise care in favor of the person for whose benefit the duty is imposed; (2) the failure to perform the duty; and (3) a consequent injury so connected with the failure to perform that duty that the failure is the proximate cause of the injury, and it was held (p. 342): “If a defendant’s negligence does nothing more than furnish a condition by which the injury is made possible, and that condition causes an injury by the subsequent independent act of a third person, the two are not concurrent and the existence of the condition is not the proximate cause of the injury. The test is whether the party guilty of the first act or omission might reasonably have anticipated the intervening cause as a natural and probable consequence of his own negligence, and, if so, the connection is not broken; but if the act of the third person which is the immediate cause of the injury is such as in the exercise of reasonable diligence would not be anticipated and the third person is not under the control of the one guilty of the first act or omission, the connection is broken and the first act or omission is not the proximate cause of the injury. Seith v. Commonwealth Electric Co., 241 Ill. 252; Jenkins v. LaSalle County Carbon Coal Co., 264 Ill. 238; Hartnett v. Boston Store, 265 Ill. 331.”

In Hartnett v. Boston Store, 265 Ill. 331, the court said that what constitutes proximate cause has been defined in numerous decisions with practically no difference of opinion, and stated the rule as i follows (p. 334) : “The injury must be the natural and probable result of the negligent act or omission and be of such a character as an ordinarily prudent person ought to have foreseen might probably occur as a result of the negligence, although it is not essential that the person charged with negligence should have foreseen the precise injury which might result from his act.”

In Wolff Mfg. Co. v. Wilson, 152 Ill. 9, a barber’s post, insecurely fastened near the outer edge of a sidewalk, was thrown over by the driver of a team who backed his wagon into it, injuring plaintiff. The post, although not fastened, would not have caused the injury but for the act of the driver, and it was held that the intervening cause was the proximate cause of the injury.

In Welsh v. John Griffiths & Son Co., 270 Ill. App. 624 (Abst.), defendant was about to erect a new post office in Chicago, and constructed a fence around the premises made of thin boards used for the purpose of shutting off the property. Defendant had advertised for help and several thousand men appeared the next morning seeking employment. Plaintiff had entered inside the fence and was waiting, and as the watchman came out of the power house the crowd moved forward in anticipation of securing employment, pushing over and breaking the fence and injuring plaintiff. It was argued that defendant in advertising for workmen during a period of depression should have foreseen that a crowd would gather and that its fence might be pushed down causing injury to someone. The court directed a verdict for defendant and the judgment was affirmed on the ground that neither the condition of the fence nor the huge crowd was the proximate cause of "the injury, but rather that the proximate cause was the intervening independent act of some portion of the crowd in surging against the fence. In discussing this phase .of the case the court said: “It has been repeatedly held that if a defendant’s negligence does nothing more than furnish a condition malting the injury possible and injury follows by the subsequent independent acts of third persons which could not have been reasonably anticipated, the condition is not the proximate cause of the injury. [Citing numerous eases, including Seith v. Commonwealth Electric Company and Hartnett v. Boston Store, supra.] The test is whether the party guilty of the alleged negligence might reasonably have anticipated the intervening cause as a natural and probable consequence of his own negligence. ’ ’

Another case cited by defendant is Steenbock v. Omaha Country Club, 110 Neb. 794, 195 N. W. 117. Plaintiff, acting as a caddy at defendant’s club, was injured when an automobile driven by a member, Crowfoot, ran into a flagpole which defendant’s employees had taken down for purposes of repair and laid across the club driveway. Plaintiff was sitting near one end of the flagpole, awaiting employment as a caddy. Crowfoot settled with plaintiff and the action proceeded against the country club, resulting in a verdict and judgment for plaintiff. In reversing this judgment for failure of the trial court to direct a verdict, the Supreme Court of Nebraska said that the controlling question at issue was whether the placing of the flagpole across the driveway of the country club or the knocking of the pole against plaintiff’s back by Crowfoot was the proximate cause of the injury, and then affirmed the rule laid down by the decisions hereinbefore discussed as follows (p. 796): “To constitute proximate cause, under authority of the adjudicated cases, the injury must be the natural and probable result of the negligence, and be of such character as an ordinarily prudent person could have known, or would or ought to have foreseen might probably occur as the result. It is not sufficient that the negligence charged does nothing more than furnish a condition by which the injury is made possible, and if such condition causes an injury by the subsequent independent act of a third person, the two acts are not concurrent and the existence of the condition is not the proximate cause of the injury. There may have been carelessness and negligence on the part of the country club in placing the flagpole across its driveway, but this, in itself, no matter how careless and negligent it might be, would not and could not alone cause the injury.”

These decisions enunciate the established rule in cases involving actionable negligence. Applying the rule to the case at bar it seems reasonably clear that Smith’s act in driving the golf ball was the immediate cause of the injury to plaintiff, and that in the exercise of reasonable diligence defendant was not required to anticipate the consequences of Smith’s drive. Employing the reasoning in Steenbock v. Omaha Country Club, supra, it may be said with equal force that the condition of the golf course might have existed for years without injury to anyone had it not been for the intervening independent act of Smith. As defendant’s counsel points out, the question presented is not whether defendant should have foreseen that an accident might happen, but rather whether the condition of the course operated by defendant unreasonably subjected plaintiff to damages and hazards over and above those commonly inherent in the game of golf. Persons operating any golf course may reasonably expect that because of the somewhat dangerous nature of the game, accidents may occur at any time, but to subject them to liability for such an accident would make them insurers of all players on the course. This is not the law.

Plaintiff’s counsel takes the position that to lay out a nine-hole course on 30 acres of ground is negligence per se. He bases this argument upon the evidence of a recognized golf course architect who testified that considerably more acreage ought to be employed in laying out a nine-hole course so as to make the fairways wider and more amply protected by intervening shrubs, rough and spaces, and relies on quotations from various books and magazine articles, apparently not introduced in evidence, concurring in the opinion of the expert. The construction of the course is criticized because numerous fairways running parallel are played in opposite directions and because the fairways are narrow and not properly safeguarded. Plaintiff’s own expert admitted, however, that he did not know of any golf course where at some place or other it would not be possible for some one to slice or hook his ball into another fairway, and it is a matter of common knowledge that on practically all golf courses, including those constructed on vast acreages where the fairways are wide and well separated by rough and shrubs, there are parallel holes, played in opposite directions, where a sliced or hooked ball may and frequently does go into another fairway. This is one of the incidents of all courses, with which golfers generally are familiar. The charge that defendant was negligent in maintaining the sixth, and seventh fairways in such proximity to each other that a player on No. 7 fairway was unduly exposed to danger by a ball driven from No. 6 tee, does not constitute negligence per se. Plaintiff had played six holes, had an unobstructed view of the whole course, and as an experienced golfer was undoubtedly familiar with the dangers inherent in the game. He testified that he was “rather concerned with the fact that these fairways were rather narrow. I knew that. I also knew that there might be boys and girls playing around there that afternoon who weren’t true and accurate drivers. ” If he had looked he would have seen the foursome driving off the sixth tee, but according to his own testimony, “I didn’t pay any attention to that. ’ ’ The language of the Scottish court in Andrew v. Stevenson, (1905), 13 Scot. L. T. 581, is particularly appropriate in this connection: ‘1 The risks of accident in golf are such, whether from those playing behind or from those meeting the player on crossing his line of play, that in my opinion no one is entitled to take part in the game without paying any attention to what is going on around and near him, and that when he receives an injury which by a little care and diligence on his part might have been escaped, he should not be entitled to claim damages for that injury.”

Plaintiff’s counsel cites and quotes from Castle v. St. Augustine’s Links, Ltd., 38 Times Law Reports 615, and characterize that decision as controlling. In that case the plaintiff, while driving a taxicab along a public highway running parallel and in close proximity to the 13th hole of the course, was struck by a ball hit from the tee. Notice of that danger had been brought home to the proprietor of the course, and the court held that the slicing of the ball into the road was not only a public danger but was the probable consequence of people driving from this particular tee. A similar result was reached in Wills v. Wisconsin-Minnesota Light & Power Co., 187 Wis. 626, wherein defendant maintained an amusement park where it had permitted the playing of baseball. Plaintiff followed a highway which led from the entrance to the park and was struck by a foul ball from the batter at home plate and injured. Recovery was permitted upon the theory that it was defendant’s duty to safeguard visitors to its park against dangers that might have been reasonably foreseen. This type of cases have no application to the casé at bar, however, because recovery is always based on the theory of a public nuisance. In those cases the courts say that it is necessary for plaintiff to prove that defendant had knowledge, actual or constructive, of the inherent danger. In the case at bar defendant offered to prove that there had been no previous accidents on this course for the purpose of showing that it had no knowledge of inherent danger, but the court denied the offer, notwithstanding the settled rule that where the dangerousness of a condition or place is alleged to be the cause of the accident other accidents occurring at that place under substantially the same conditions may be shown for the purpose of proving defendant’s knowledge of the danger, and the corrollary of this rule that proof of no other accidents may be shown for the purpose of showing defendant’s lack of knowledge. (Wolczek v. Public Service Co., 342 Ill. 482.)

Another class of cases cited and discussed by plaintiff are decisions dealing with injuries to spectators at baseball games. There are numerous such decisions in various jurisdictions and a well settled rule of law has been formulated by the courts. It is generally held that a proprietor of a baseball park, who for a consideration invites spectators to watch the games therein, is under a duty to screen in the dangerous part of the grandstand behind and near the home plate. If a patron chooses not to avail himself of the protected portion of the stand, but prefers to sit elsewhere so as to obtain a better view of the game, the proprietor is not liable if the patron is injured, and the patron is held to have assumed the risk of injury from a thrown or batted ball. (Loring v. New Orleans Baseball & Amusement Co., 16 La. App. 95, 133 So. 408; Crane v. Kansas City Baseball & Exhibition Co., 168 Mo. App. 301, 153 S. W. 1076; Kavafian v. Seattle Baseball Club Ass’n, 105 Wash. 215, 177 Pac. 776, 181 Pac. 679; Wells v. Minneapolis B. & A. Ass’n, 122 Minn. 327, 142 N. W. 706.) This rule has been held applicable even though at the time plaintiff entered the grandstand all the seats behind the screened portion were occupied. (Brisson v. Minneapolis B. & A. Ass’n, 185 Minn. 507, 240 N. W. 903.)

Plaintiff contends, however, that under the decisions of this State the doctrine of assumed risk applies only to the relation of master and servant, and not in other cases. Much of the confusion arising in decisions where this doctrine was invoked appears to have arisen from the theory adopted by some authorities that this defense is merely an adaptation of the doctrine of contributory negligence as applicable to master and servant cases. Francis H. Bohlen, in “Studies in the Law of Torts” (20 Harvard Law Review, 14, 91), points out this confusion, and says that neither the maxim, volenti non fit injuria, as expressing the principle that one who has voluntarily encountered a known danger cannot recover from the creator thereof, nor the principle itself, is confined to cases of workmen against their employers, and “is not in any way founded upon anything peculiar to the relation of master and servant, nor based upon the contractual nature of the relation.' It does not result from an implied term in a contract creating the relation; it applies equally to any relation voluntarily assumed — contractual or not.” This position received judicial recognition in Miner v. Conn. River R. Co., 153 Mass. 398, wherein the court said (pp. 402, 403): “Independently of any relation of master and servant, there may be a voluntary assumption of the risk of a known danger, which will debar one from recovering compensation in case of injury to person or property therefrom, even though he was in the exercise of due care. In other words, it may be consistent with due care to incur a known danger voluntarily and deliberately; and this may be so when the danger arises from the known or apprehended neglect or carelessness of others. . . . But the principle that one may be debarred from a recovery when he voluntarily assumes the risk is not identical with the principle on which the doctrine of contributory negligence rests, and in proper cases this ought to be explained to the jury.”

We are aware of the fact that there are cases in this State holding that the doctrine of assumption of risk is confined to situations where a contractual relationship exists, and in some instances it has been restricted to the relationship of master and servant, but current authority is otherwise. In Murphy v. White City Amusement Co., 242 Ill. App. 56, plaintiff was injured while riding down ‘ ‘ The Chutes ’ ’ at White City in Chicago, which was characterized by the court as a simple amusement device with which plaintiff was familiar. The court propounded the inquiry whether plaintiff could maintain an action for an injury received while riding on “The Chutes” on the sole ground that it was dangerous to do so, and answered the inquiry by saying: “The answer must be in the negative.” In discussing the relationship between the parties, the court said (pp. 58, 59):

‘ ‘ While the relation between plaintiff and defendant may have been that of passenger and carrier, yet the relative duties of the parties depend upon the kind of carriage contracted for. Plaintiff knew that she was contracting for a swift ride down a steep incline in a boat which bounced violently when it struck the water at the bottom. Her contract of carriage was subject to the dangers incident to the experience. She testified that she took the ride to receive the thrill caused by such dangers. The factor of danger was one of the things she contracted for.
“In Pointer v. Mountain Ry. Const. Co., 269 Mo. 104, where the passenger was injured upon a scenic railway, the court said that he ‘knew he was making no contract for a Pullman car upon the level tracks of a steam railroad,’ but contracted for the peculiar carriage offered.
“In Carlin v. Krout, 142 Md. 140, a passenger was injured while riding on the ‘Ocean Wave.’ . . . and it was held that the injuries were not caused by any breach of duty charged against the proprietor with reference to ordinary conditions represented or understood to be safe, ‘but to those existing in an unusual device which was intended to be used only by persons who desired to assume the risks which its use clearly involved. ’ ”

This decision is in accordance with the great weight of authority pertaining to injuries received while playing or watching such games as hockey, baseball, polo, etc. In Ingersoll v. Onondaga Hockey Club, 245 App. Div. 137, 281 N. Y. S. 505, it was held that a spectator at a hockey game could not recover for injuries sustained when struck by the puck, the court holding that plaintiff, in attending the hockey game, occupied precisely the same status as a spectator at a ball game, and the same rules should be applied in each instance. “There was no obligation on the part of respondents to protect appellant against a danger incident to the entertainment which any reasonable spectator could foresee and of which she took the risk.” (Page 508.)

In Rich v. Madison Square Garden Corp., 266 N. Y. Supp. 288, 149 Misc. 123, affirmed 241 App. Div. 722, 270 N. Y. Supp. 915, the court held that plaintiff, who was injured by a flying hockey stick, was not entitled to recover, on the ground that it was not foreseeable that the hockey stick would leave the player’s hands and pass among the spectators, likewise concurring in the rule announced in the baseball cases.

In Standard Oil Co. v. Titus, 187 Ky. 560, it was held that the doctrine of assumed risk is not based entirely on contract, but grows out of the application of the maxim “volenti non fit injuria,” and that “it is well settled that independently of the relation of master and servant, there may be a voluntary assumption of the risk of a known danger which will debar one from recovering compensation in case of injury, even though he was in the exercise of due care. [Citing Miner v. Connecticut River R. Co., 153 Mass. 398, supra, and other cases.] Therefore the question is whether plaintiff, as a matter of law, voluntarily assumed the risk of a known danger. ’ ’

In Andrews v. Stevenson, 13 Scot. L. T. 581, herein-before discussed, the court, among other things, denied liability because of the doctrine of voluntary assumption of risk, and in Benjamin v. Nernberg, 102 Pa. Super. Ct. 471, 157 Atl. 10, recovery was denied on the same ground. In the latter case plaintiff was struck by a golf ball driven by defendant, and it was held that as a matter of law plaintiff had assumed the risk of injury resulting from his own participation in the game, the court saying: “It is well known that not every shot played by a golfer goes to the point where he intends it to go. If such were the case, every player would be perfect and the whole pleasure of the sport would be lost. . . . The plaintiff himself had been playing golf for a period of about 20 years, and must therefore be held to be familiar with all the risks of the game. . . . This risk of golf players must accept.”

In Schlenger v. Weinberg, 107 N. J. L. 130, judgment of nonsuit was affirmed in a case where plaintiff, while playing golf, was struck and injured by a golf ball driven by an unnamed member of the club. Liability was sought to be attached to the proprietors of the course, but the court held that the evidence did not connect the corporate defendant with the transaction and said that “mere ownership of a golf course does not impute liability for an injury suffered by another from a golf ball driven by a player on the course.”

In Everett v. Goodwin, 201 N. C. 734, cited by plaintiff, the negligence alleged against the golf club was that it had undertaken to provide “rangers” to police the play on the course, and that the rangers employed for this purpose negligently failed to carry out their duty and enforce the rules governing play on the course, which the evidence showed the club had promulgated. Recovery was permitted upon the theory that defendant having assumed a duty and employed rangers who negligently failed to perform the very duty for which they had been employed thereby rendered the club liable. That, however, presents an entirely different situation. The decision was criticized in 9 Temple Quarterly 53. Since golfing accidents in many instances result from misdirected balls hitting players on other holes or fairways, policing the course through the means .of rangers or other attendants could not prevent misdirected shots or prevent accidents on the greens.

Various other points are raised and discussed by counsel on both sides. It is earnestly urged by defendant that plaintiff was guilty of contributory negligence and it complains of error in charging the jury. Under the evidence there is considerable force to the contention that plaintiff was guilty of contributory negligence, having by his own evidence admitted that he was «not in the exercise of ordinary care for his own safety, and we would be justified in reversing the judgment and remanding the case upon the sole ground that the verdict was contrary to the manifest weight of the evidence. Since there is no substantial dispute as to the evidence, however, it would serve no useful purpose to remand the cause. We are of the opinion that under the pleadings and evidence plaintiff failed to show that defendant was guilty of any negligence proximately causing the injury to plaintiff; the court should have directed a verdict. Therefore the judgment of the superior court is reversed.

Judgment reversed.

Scanlan and Sullivan, JJ., concur.


text:
    Meisel Tire Company, Appellant, v. Edwards Finance Corporation, Appellee.
    Gen. No. 39,917.
    Opinion filed May 3, 1938.
    Clarence F. Martin, of Chicago, for appellant.
    No appearance for appellee.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

Meisel Tire Company, plaintiff, filed an action of detinue in the municipal court to recover certain tires, tubes and a storage battery, or their value, from defendant, Edwards Finance Corporation. The cause was tried by the court without a jury, resulting in a finding and judgment that defendant was not guilty in detinue and assessing costs against plaintiff. Defendant has filed neither its appearance nor briefs on appeal.

The essential facts disclose that plaintiff had. entered into a conditional sales contract with Louis Keller, October 8,1936, for the sale and purchase of four automobile tires, four tubes and a storage battery, which were delivered to Keller and installed on a 1929 Plymouth sedan, then in Keller’s possession. At the time these accessories were placed on the car it was subject to a conditional sales contract dated September 5, 1936, between Keller and defendant’s assignor. This fact, however, was not known to plaintiff. The conditional sales contract entered into between plaintiff and Keller provided that title to the tires, tubes and battery should not pass to Keller until the purchase price had been fully paid, and that upon default plaintiff might take immediate possession of the property covered by the contract. A similar agreement was entered into between Keller and defendant’s assignor with reference to the purchase of the car. Subsequent to the making of these conditional sales agreements Keller defaulted in his payments under both contracts, and the automobile was repossessed by defendant, whose counsel admitted in open court it had possession of the four tires but denied possession of the tubes and battery. Keller, however, testified that the tubes and battery had been placed on the car and that he had possession thereof. The trial court, after hearing the testimony of Keller, found defendant not guilty in detinue, before plaintiff had rested its case, and refused to hear any more evidence despite the offers of proof by plaintiff, the court indicating that plaintiff was not entitled to a return of its accessories because the automobile on which they were placed was covered by a prior conditional sales contract.

The validity of conditional sales contracts since the enactment of subsec. 1 of sec. 20, ch. 121½, par. 20, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 121.24], is no longer questioned. In the leading case of Sherer-Gillett Co. v. Long, 318 Ill. 432, the court held that the conditional vendor of a display counter could successfully assert its right thereto, even though one who had in good faith and without notice purchased it from the conditional vendee, and the interpretation of the statute adopted in that case has since been consistently followed by our courts in Silverthorne v. Chapman, 259 Ill. App. 289; Standard Computing Scale Co. v. Dombrowski, 257 Ill. App. 409; Graver Bartlett Nash Co. v. Krans, 239 Ill. App. 522; and Hixson v. Ward, 254 Ill. App. 505.

The principal question of law involved is whether readily detachable accessories placed upon the automobile of another person became merged into and an integral part of the car so as to lose their identity, even though the automobile is subject to another conditional sales agreement. Plaintiff’s counsel says that this is a case of first impression in Illinois, and that a diligent search of the authorities has failed to disclose any decisions in point. Other States, however, have had occasion to discuss the principle involved, and in several instances have passed squarely on the point. In an early case, Clark v. Wells, 45 Vt. 4, it was held that new axles and wheels substituted for the worn out parts of a wagon did not merge with the principal chattel, and the conditional seller of the wheels and axles was permitted to recover their value in a suit for conversion.

Bousquet v. Mack Motor Truck Co., 269 Mass. 200, is precisely in point. In that case the conditional seller of tires which were placed upon a truck which maintained his title against the conditional vendor of the truck had repossessed both the truck and the tires upon default of the conditional purchaser, and in discussing the question under consideration the court said (p. 201): “We think it plain that one who attaches tires which he does not own to a motor truck which he does not own does not thereby pass title in the former to the owner of the latter. The doctrine of accession of chattels does not help the defendant. That doctrine applies where something is added to, attached to, or mixed with something else so that it cannot again be separated without the destruction or serious injury of the whole so formed. ’ ’

General Motors Truck Co. v. Kenwood Tire Co., 94 Ind. App. 25, is another case in point. It involved a conditional sales agreement for tires placed upon a truck which was the subject of another conditional sales agreement. The court sustained the contention of the conditional vendor of the tires, in a suit to establish title thereto, and arrived at the conclusion that (p. 28) “the vendor of property under a conditional sales contract can recover such property when placed upon other personal property purchased under a conditional sales contract where the same can be conveniently detached and has not become an integral part of the property to which it is attached. ’ ’

K. C. Tire Co. v. Way Motor Co., 143 Okla. 87, 287 Pac. 993, and various other cases cited in plaintiff’s brief are to the same effect. All these decisions enunciate the principle laid down in the foregoing cases. We think the logic of these authorities is obviously sound, because tires, tubes, batteries and other accessories of a similar character attached to automobiles are by their nature temporary and so constructed as to be capable of ready attachment and detachment without harm to the automobile.

Plaintiff sued for the return of the chattels or in the alternative a judgment for their value, and therefore it should have been allowed, in accordance with its offers of proof, to introduce evidence of the value of the accessories.

On the hearing defendant’s conns el urged that plaintiff should have made a demand for the chattels. However, since defendant had denied plaintiff’s right to the accessories, and also because the original taking was wrongful, no demand was necessary. (Woodbury v. United States Cas. Co., 284 Ill. 227, 240; Hayes v. Massachusetts Mut. Life Ins. Co., 125 Ill. 626.) Moreover, plaintiff sought by one of its offers to prove that a demand and refusal had been made and was precluded from doing so by the court’s ruling. The value of the property, as well as evidence of a demand and refusal, was competent and it was error for the court to overrule these offers of proof.

For the reasons given we are of the opinion that the court erred in finding the defendant not guilty in detinue. The judgment of the municipal court is reversed and the cause remanded for a new trial.

Judgment reversed and cause remanded.

Scanlan and Sullivan, JJ., concur.