text:
    Pauline Field et al., Appellants, v. Cleo Bittner et al., Appellees.
    Gen. No. 8,421.

      Opinion filed August 25, 1932.
    Hamilton, Black, Hóltgreve & Klatt, for appellants Panline Field, William A. Pfeiffer, Jr., and Elsie Bisser, administrators with the will annexed to the last will and testament of W. A. Pfeiffer, Sr., deceased; Pauline Field, William A. Pfeiffer, Jr., Elsie Bisser, Ernest H. Pfeiffer and Baymond B. Pfeiffer.
    Bidgely & Bidgely, for appellant Washington Land Co.
    Balph Dempsey, P. A. D’Aroy, C. S. Townley, Wayne C. Townley and Louis L. Williams, for appellees Oleo Bittner, Nettie C. Chaffer, Dorothy Bickman, Frederick Biekman and Sophia Biekman.
    C. B. Birkett, for appellees Perry A. Birkett and Lester P. Birkett, administrators of the estate of George Birkett, deceased.

      G-eorge W. Hunt and J. Edward Radley, for appellee Rae C. Heiple, Receiver of Henry Denhart & Co.
   Mr. Justice Jett

delivered the opinion of the court.

It appears that on February 18, 1925, W. A. Pfeiffer, Sr., and wife conveyed to Henry Denhart, trustee, certain lands and premises in Knox county in trust -for the purpose of securing the payment of five certain principal promissory notes of $5,000 each, executed by said W. A. Pfeiffer, Sr., and payable to the order of himself and by him indorsed in blank. This loan was obtained from Henry Denhart and Company by the Washington Land Company, a corporation. Henry Denhart and Company was then and had been for some considerable length of time engaged in the general banking and farm loan business in Washington, Illinois, prior to 1920 operating as a private bank, but organized as a State Bank under the laws of the State of Illinois on January 1,1921. The bank was closed by the State auditor of public accounts in April, 1930, and Rae C. Heiple was appointed receiver and is still acting as such. The five notes secured by said trust deed were all payable on March 1st, 1930, at the banking house of Henry Denhart and Company with interest payable annually at the rate of five and one-half per cent per annum. Appellees Cleo Bittner, Sophia Rick-man, Frederick Rickman and Dorothy Rickman and Nettie Chaffer own four of the notes, Bittner having two, the Rickmans one and Nettie Chaffer one. The administrators of the estate of G-eorge Birkett, who are defendants to the bill, own the other note. No interest had been paid on said notes since March 1,1929, and no part of the principal had been paid.

It further appears that W. A. Pfeiffer, Sr., died on November 14, 1929, testate. Pauline Field, Wm. A. Pfeiffer, Jr., and Elsie Risser were appointed administrators with the will annexed of the estate of W. A. Pfeiffer, Sr., deceased, and' are still acting as such administrators. The Washington Land Bank Company is a corporation organized under the laws of the State of Illinois, with its principal place of business at Washington, Illinois. The object for which it was formed was “to conduct a general real estate agency business” and was organized in 1919. Appellees Bittner, the Rickmans and Chaffer filed their bill to the February term, 1931, of the Knox county circuit court making the administrators of the George Birkett estate, of the W. A. Pfeiffer estate, the Washington Land Company, Rae C. Heiple, receiver, Henry Denhart, trustee, and others parties defendant. All of the defendants answered.

A hearing was had and a decree of foreclosure entered which decreed the payment of $11,400.37 to Cleo Bittner; $5,700.18 to Dorothy Rickman, Frederick Rickman and Sophia Rickman, and $5,700.18 to Nettie C. Chaffer, and solicitors’ fees of $2,280; the payment of $5,700.18 and solicitors’ fees of $285 to Perry A. Birkett and Lester P. Birkett, administrators of the estate of George Birkett, deceased, and found that W. A. Pfeiffer, Sr., was personally liable during his lifetime for the payment of said principal notes, interest, costs of suit, expenses of the sale and solicitor’s fees, and that the estate of W. A. Pfeiffer, Sr., should be held to be liable to pay any deficiency; ordered the administrators of W. A. Pfeiffer, Sr., deceased, to pay said sum within 10 days and that in default of such payment the premises be sold at public auction by the master in chancery; and that in case the proceeds from said sale be insufficient, that the master specify the amount of such deficiency and that the defendants, the administrators of the estate of W. A. Pfeiffer, Sr., deceased, whose estate is personally liable, pay such deficiency.

The record discloses that after the master’s report and objections and exceptions thereto were filed, the administrators for the estate of Pfeiffer asked leave to file a cross-bill charging that the trust deed and notes were invalid because of an abuse of corporate power by appellant, Washington Land Company. The court denied the leave to file a cross-bill.

An appeal from this decree is prosecuted by the administrators of the estate of W. A. Pfeiffer, deceased, for its legatees and devisees. The Washington Land Company did not join in the appeal but has filed a brief herein and has attempted to join in the assignment of errors.

The facts as shown by the record are that a number of men organized what is known as the Washington. Land Company with headquarters at G-alesburg, Illinois, for the purpose of buying and selling real estate. W. A. Pfeiffer, Sr., had stock in the Washington Land Company and was one of its active members. The Washington Land Company no doubt exceeded its authority as provided by the statute, that is, instead of dealing in land, the company bought land and held it for speculative purposes. Subsequently they realized they could not do this openly, so in the particular case in question, they purchased a tract of land and took title to it in the name of W. A. Pfeiffer, Sr. The purchase price of the land was $54,000. The land company had only $29,000, so they made application to the Henry Denhart & Company Bank for a loan of $25,000. This loan was secured by a trust deed signed by W. A. Pfeiffer, Sr., who was record owner of the land. The notes were taken in denominations of $5,000 each with two sets of coupons on each note, one coupon for five per cent interest and the other for one-half of one per cent. At the time the deed to this land was made to W. A. Pfeiffer, Sr., he and his wife executed' a deed in blank to the Washington Land Company, conveying to the Land Company the same premises which were mortgaged to Henry Denhart & Company. The Denhart Company sold five $5,000 notes, being the ones involved in this controversy. The interest was in default and complainants instituted this foreclosure proceeding. W. A. Pfeiffer, Sr., had died, so his heirs and administrators with the will annexed were also made parties defendant. It is the contention of the appellants that W. A. Pfeiffer, Sr., acted as agent and trustee in taking title to the land, and he in fact executed the mortgage as agent and trustee for the Washington Land Company; that this fact was known to Henry Denhart &¡¡ Company who took the notes involved in this controversy and later sold them to appellee and defendant note holders; that the note holders in reality were affected with the knowledge which the Henry Denhart & Company had and their rights were no greater than those of the Denhart Company; that in this State the assignee of a note and trust deed takes the same subject to all equities in the hands of the mortgagees and the note holders hold the same subject to all of the equities that would exist if they had been held by their assignor, the Denhart Company; second, that by recording the trust deed in Knox county where the land is located, this gave notice to the note holders of the interest of the Washington Land Company in and to the land in question; that the holders of the notes in question were not innocent purchasers for value before maturity.

It is argued that because of the fact that the court refused the administrators of the estate of Pfeiffer to file a cross-bill to present the question that the notes and trust deed be declared null and void, was error. It will be kept in mind that no leave was asked for with a view of filing a cross-bill until after the master had filed his report and reported his conclusions to the court.

It is not improper for a court to deny a motion to file a cross-bill presenting matters of defense inconsistent with answers on file after a hearing in the cause has been concluded. Fread v. Fread, 165 Ill. 228, 232; Nix v. Thackaberry, 240 Ill. 352, 359; Drew v. Drew, 271 Ill. 239, 248. Furthermore such cross-bill is unnecessary where the matters pleaded are equally available by answer. Roby v. South Park Commissioners, 252 Ill. 575, 583.

An examination of the cross-bill (which is appended to the record following the certificate of the clerk thereto, and which is not a part of the record) discloses that appellants, the Pfeiffer heirs, sought no relief thereby that was not available to them by a proper answer. It is a well established rule that a cross-bill must be founded upon matters of defense entirely consistent with the answer to the original bill. Ragor v. Brenock, 175 Ill. 494, 500.

An examination of the answer filed by the Pfeiffer heirs in connection with the proposed cross-bill discloses that the position taken in the cross-bill is entirely inconsistent with their answer. The cross-bill prays that the mortgage and notes be declared void. The answer of the Pfeiffer heirs offered as a defense no claim other than a denial of personal liability of W. A. Pfeiffer and of his estate. No error therefore was committed in the refusal, in view of the state of the record, to permit the filing of the cross-bill.

An examination of the record discloses that W. A. Pfeiffer, Sr., took title and executed these notes as an accommodation to the Washington Land Company and was an accommodation maker. It is quite evident that Pfeiffer, at the time he executed these notes, had knowledge of the fact that the notes were going to be sold by the Denhart Company. Instead of making the loan in one $25,000 note there were executed five $5,000 notes with two coupons as above stated. Anyone at all familiar with real estate or banking business would fully know that the reason this was done would be so that these notes could be more readily disposed of. There is no evidence in the record which tends to show in any manner that the purchasers -of these notes were not what are regularly termed innocent purchasers for value. As far as the record is concerned it shows that the title was in Pfeiffer and each holder paid value received for their notes when they purchased them from Denhart & Company. It seems to be a settled rule that when the accommodation paper is in the hands of one who has taken it in good faith in the usual course of business for value, the maker of the same can make no defense in a foreclosure proceeding, to enforce their rights.

In Foreman Trust & Savings Bank v. Cohn, 342 Ill. 280, at page 286, the court approved the rule announced in Miller v. Larned, 103 Ill. 562, relating to the question of accommodation paper and quoted from Miller v. Larned, supra, from page 580, as follows: ‘ ‘It would be most unreasonable to affirm the grantor in a mortgage to secure accommodation paper has any equity superior to those of the assignee of the note, who thereby becomes the equitable assignee of the mortgage. Any application of the doctrine of Olds v. Cummings (31 Ill. 188), to the maker of a mortgage to secure accommodation paper would be to make a most equitable and reasonable doctrine the means of enabling a party to perpetrate a great wrong on another. A court of equity will not lend its aid for any such purpose. Of course, the party accommodated could never recover the amount of the bill or note from the maker, but the settled law is, wherever the common law prevails, to accommodation paper in the hands of one who has taken it in good faith in the usual course of business for value the maker can make no defense. . . . To allow the equities existing between the original parties to accommodation paper secured by mortgage to prevail over the equities of the assignee of the note would be to carry the doctrine of Olds v. Cum mings to such an unreasonable extent as would ensnare honest dealers in such securities.”

In the Foreman Trust-Cohn case, supra, at page 286, the court further said: “In Naef v. Potter, 226 Ill. 628, it was held that a transferee of accommodation paper in good faith and for value, even after maturity and with notice that it is accommodation paper, is entitled to recover, notwithstanding it has been diverted from its purpose, where there are no restrictions as to its use written into the paper and no notice of such restrictions brought to the knowledge of the transferee; that such accommodation paper must be made without legal consideration and the maker may impose such restrictions upon it as he desires, but unless such restrictions are written into the paper or otherwise brought to the knowledge of the transferee for value before he has received the paper, the fact that the paper was past due and that there were verbal restrictions as to its use constitutes no defense to the paper or the foreclosure of the mortgage securing it. To the same effect is Keenan v. Blue, 240 Ill. 177, where it was held that fraudulent representations going only to reasons prompting the maker of accommodation paper to lend credit are no defense to its collection. ’ ’

Section 29 of the Illinois Negotiable Instruments Act, Cahill’s St. ch. 98, ¶ 49, provides:

“An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party and in case a transfer after maturity was intended by the accommodating party notwithstanding such holder acquired title after maturity. ’

The holders of these notes were innocent purchasers for value. Such being the case the Pfeiffer heirs cannot defeat the right of the complainants to foreclose the trust deed.

It is argued by the appellants that the court erred in refusing to find that the mortgage given by W. A. Pfeiffer, Sr., was illegal and void and that the notes signed by W. A. Pfeiffer, Sr., for money borrowed for the Washington Land Company were illegal and void. Assignments of error are to that effect. In view of the pleadings appellants are not in a position to argue that the court erred in refusing to find that the mortgage given by Pfeiffer Sr., was illegal and void or that the money borrowed for the Washington Land Company was an illegal and void transaction. The only disputed issue presented by the pleadings relates to the question of the liability of the Pfeiffer estate for any deficiency which may result from foreclosure sale. This was the only disputed issue considered by the master and the only issue presented by the objections and exceptions to the report of said master. Concerning the matters in dispute the master’s findings approved by the court, among other things, were as follows:

“That each of said notes has on its face the printed statement that the same were negotiated by Henry Denhart & Company Bank, and that each was made payable at the office of said bank, and said trust deed has on its back the printed statement that it was ‘negotiated by Henry Denhart & Company, bankers and dealers in real estate loans’; that Henry Denhart & Company was engaged in a general banking and farm loan business; that Henry Denhart was president of said bank and that W. A. Pfeiffer, Sr., knew, or should have known, that in the ordinary course of business that the said notes would probably be sold to customers of the bank, and in entering into the transaction involving the said notes and trust deed with said bank and with Henry Denhart, trustee, W. A. Pfeiffer, Sr., gave his express or implied consent to the subsequent sale of said notes to third parties.

“That there is no evidence or testimony to indicate that the purchasers of said notes were not innocent purchasers for value before maturity, nor that such purchasers had any knowledge or notice, actual or constructive, that W. A. Pfeiffer, Sr., was not the actual owner of the mortgaged premises, or that he was acting as trustee or agent or that he did not intend to assume personal liability for the payment of said notes.”

Although the question relative to the invalidity of the trust deed and notes is not raised by the pleadings, still appellants have seen fit to take up much space in discussing that the alleged abuse of the corporate powers of the Washington Land Company invalidated the trust deed and notes in question. It is insisted that the notes and trust deed are null and void because the Washington Land Company had no power under its charter to purchase the mortgaged real estate as an investment and no power to borrow money with which to make such purchase either directly or through Pfeiffer as trustee, and that appellees are chargeable with notice that such notes were void' because the stockholders of Henry Denhart & Company from which appellees purchased the principal notes were also stockholders of said Washington Land Company and knew of the alleged ultra vires character of this transaction. If this conveyance had been made directly to the Washington Land Company it would not have been subject to collateral attack. The cases relied upon by appellants, in which conveyances to corporations or to trustees for corporations, have been declared void when collaterally attacked, are those in which the purchase was beyond the scope of the powers granted to it by law. Corporations cannot be organized in Illinois for the sole purpose of buying and selling lands, and corporations organized in another State have not been permitted to engage in such business in Illinois, and a purchase by a foreign corporation has been avoided upon collateral attack. The rule, however, is that a conveyance to a corporation is not subject to collateral attack unless it appears that the purchase was wholly outside the general scope of its corporate powers, express or implied, and entirely foreign to the objects and purposes of its creation,— something which, under any and all circumstances, was beyond its power, either as expressed in the grant or as possessed by necessary implication. Rector v. Hartford Deposit Co., 190 Ill. 380, 389.

The Washington Land Company was not organized for an illegal purpose. The statutes of Illinois in force on March 3, 1919, when this corporation was chartered, quoted in Haberer v. Smerling, 307 Ill. 191, 194, provide that “corporations may be formed under this act for the purpose of carrying on the real estate agency business.” Such corporations were given the same powers as are given to “agency and loan corporations” under the present statute. Illinois statute then, as now, provided that corporations organized under such act should have power to “acquire and to own, possess and enjoy so much real and personal property as may be necessary for the transaction of the business of such corporation, and to lease, mortgage, pledge, sell, convey or transfer the same,” etc. It further provided that such corporations should have power “to borrow money at such rate of interest as the corporation may determine . . . and to mortgage its property, both real and personal, to secure the payment thereof” (General Incorporation Act, sec. 6). Corporations, then as now, had a right to acquire title to real estate in satisfaction of a debt. It is true that no corporation could then be organized in Illinois for the purpose of acquiring or owning real estate, and the secretary of state would have refused a charter upon an application to organize a corporation for such a purpose. The Washington Land Co. was organized “'to conduct a general real estate agency business” and was, therefore, organized for a lawful purpose. It had power to acquire real estate, borrow money and give security. The question as to whether it has abused its power can only be raised by the State (Bartee Tie Co. v. Jackson, 281 Ill. 452, 461; McIlvaine v. Foreman, 292 Ill. 224, 229). Furthermore the administrators of Pfeiffer and the Washington Land Co. are estopped to plead ultra vires as a defense to the trust deed because the corporation has had the benefit of such trust deed. The contention of appellants is to the effect that the land company conspired with Pfeiffer, now deceased, one of its stockholders, to violate the statute regulating the ownership of lands by corporations by engaging in a real estate speculation in the name of Pfeiffer. It is argued that Pfeiffer and the land company should, as the fruits of such conspiracy, be relieved from the payment of the money loaned to them on Pfeiffer’s promissory notes and used in such real estate speculation because certain officers of the bank making such loan were also stockholders of the Washington Land Company and knew of such conspiracy to evade the Illinois statute.

Notice to an officer of a corporation is not notice to the corporation in transactions where the officer is dealing with the corporation in his own interest and not in the interest of the corporation (American Guaranty Co. v. State Bank of East Lynn, 244 Ill. App. 16, 29).

In Bradley v. Ballard, 55 Ill. 413, the court at page 417 said:

“It is said by counsel for complainant that á corporation is not estopped to say, in its defense, that it had not the power to make a contract sought to be enforced against it, for the reason that, if thus estopped, its powers might he indefinitely enlarged. While the contract remains unexecuted on both sides, this is undoubtedly true, but when, under cover of this principle, a corporation seeks to evade the payment of borrowed money, on the ground that although it had the power to borrow money, it expended the money borrowed in prosecuting a business which it was not authorized to prosecute, it is pressing the doctrine of ultra vires to an extent which can never be tolerated, even though the lender of the money knew that the corporation was transacting a business beyond its chartered powers and that his money would be used in such business, provided the business itself was free from any intrinsic immorality or illegality. . . :

“In cases of such character, courts simply say to the corporation: You cannot, in this case, raise the question of your power to make the contract. It is sufficient that you have made it, and by so doing have placed in your corporate treasury the fruits of others’ labor, and every principle of justice forbids that you be permitted to evade payment by an appeal to the limitations of your charter.”

The principles announced in Bradley v. Ballard, supra, would be applicable if this suit was brought by Henry Denhart & Company and it was still the owner of all of these notes. These principles apply with still greater force to this suit brought by innocent purchasers for value of said notes.

Again, the administrators and heirs of Pfeiffer, deceased, are estopped to question his title to the mortgaged real estate. As appears from the trust deed Pfeiffer granted, bargained, sold, conveyed, mortgaged and warranted certain real estate in Knox county to Henry Denhart, as trustee, for the use and benefit of the holders of the notes secured by such trust deed. His administrators and heirs sought by the cross-bill which they presented for filing in the circuit court, to question the validity of the title which he thus warranted, and rely upon such alleged failure of title as their principal defense to this suit. A mortgagor who in terms “mortgages and warrants” the property to the mortgagee is estopped, as against the mortgagee to deny that he held title when he executed the mortgage (Roderick v. McMeekin, 204 Ill. 625). In the decision in the above entitled cause at page 636 the court, among other things, said:

“He (Hicks) represented himself to be the owner when he executed the mortgage, and in the mortgage he states that he mortgages and warrants the property to the mortgagee. By the use of the words ‘and warrants ’ the mortgage executed by him is to be construed as if full covenants of seizin, good right to convey, against incumbrances, quiet enjoyment, and general warranty, were fully written therein. (Conveyance Act, sec. 11.) Inasmuch as, by the terms of his deed, he said that he had title and covenanted to defend and make it good, he was estopped from denying that he had title when he made the mortgage. (. . . Dobbins v. Cruger, 108 Ill. 188.) In Dobbins v. Cruger, supra, we said: ‘The principle is, a warrantor will not be permitted to assail a title he has solemnly covenanted to maintain. It would be a solecism to say that a party may destroy that which, at the same instant, he must uphold. ’ It is well settled that ‘when one gives a mortgage upon land to secure a debt, he is estopped by the recitals in his contract creating the lien, from denying his title to the mortgaged premises ’. . . . ‘The general rule is, that a mortgagor is es-topped from setting up, in resistance to a foreclosure proceeding, that he had no right or title to the mortgaged premises.’ ”

No pleadings filed, or presented for filing by Washington Land Company, present any question concerning the validity of the Pfeiffer title. The Pfeiffer administrators and heirs are estopped to question the validity of the title of their ancestor because of his covenants of warranty.

The decree among other things contains the following: “That in case the proceeds from the sale be not sufficient, that the Master specify the amount of. such deficiency and that the defendants, Pauline Field, Wm. A. Pfeiffer, Jr., and Elsie Eisser, administrators of W. A. Pfeiffer, Sr., deceased, whose estate is personally liable, pay such deficiency. ’ ’ The decree provides that the heirs of W. A. Pfeiffer, Sr., deceased, should pay the deficiency, if any. Of course, there would be no deficit until after a sale. Since appellees and holders of the notes in question are entitled to the decree of foreclosure as rendered, it would necessarily follow that if there was any deficiency the Pfeiffer heirs would have to pay the same. No harm has been done to the appellants or any of them merely because the decree provides for the payment of a deficiency.

We conclude that the equities of the cause are with the appellees.

The decree of the circuit court of Knox county is affirmed.

Decree affirmed.


source: Caselaw Access Project

author: Mr. Justice Baldwin

license: Public Domain

text:
    J. J. Kirby, Trustee of the Estate of Edward Chipman, Deceased, Appellee, v. C. B. Sawyer, Appellant.
    Gen. No. 8,517.
    Opinion filed September 21, 1932.
    W. H. Dyer and Thomas ¡3. Sawyer, for appellant.
    E. P. Harney, for appellee.
   Mr. Justice Baldwin

delivered the opinion of the court.

This is an action in assumpsit brought by the appellee (hereinafter referred to as plaintiff) as trustee of the estate of Edward Chipman, deceased, against the appellant (hereinafter referred to as defendant) to the January 1931 term of the circuit court of Kankakee county.

The declaration consisted of one special count and the common counts.

By the special count it was alleged that Dan Gr. Lee and Anna Lee on March 1, 1927, made their promissory note and thereby promised to pay to the order of themselves, four years after date, the sum of three thousand dollars ($3,000) with interest thereon at the rate of six per cent per annum and indorsed and delivered the note to the plaintiff.

It is further alleged that the defendant, C. B. Sawyer, by his indorsement upon said note, guaranteed its payment and although the note had matured the said Dan Gr. Lee and Anna Lee had not paid the same; that the defendant had notice thereof but had not paid the note or any part thereof and had refused to do so.

The defendant filed a plea of general issue, together with a notice of special matter and supported his plea by an affidavit of merits. The special matters of defense alleged were: Lack of consideration from the plaintiff to the defendant; that the instrument sued on was one of four notes aggregating $16,000 secured by trust deed on real estate; that a trust deed was filed for record; that the writing of the defendant on the note sued on was made after the delivery of the instrument to the plaintiff and that the guarantee was not in the form signed by the defendant; that the bill to foreclose the trust deed was filed by the plaintiff in the circuit court of Kankakee county; that the copy-of the instrument sued on was attached to the bill of complaint in such foreclosure proceeding; that the suit was prosecuted to decree and the premises sold; that the decree found there was due to the plaintiff in the foreclosure suit $18,363; that payment was defaulted and the premises sold by the master in chancery to the plaintiff herein; that the notes secured by the trust deed were not numbered; that they were executed and matured on the same date and none of them had a preference in payment; that the plaintiff purchased the lands from the master in chancery for $14,864.16, and that the note sued on was entitled to the pro-rate share of such sum; that the plaintiff thereby made an election of remedies and if the defendant became liable for any sum of money to the plaintiff the same was discharged.

The cause proceeded to trial and at the conclusion of the evidence by the plaintiff the defendant moved the court to give the jury the instruction tendered, directing the jury to find a verdict for the defendant. This motion was overruled.

At the conclusion of all of the evidence the defendant renewed his motion and requested the court to give to the jury the instruction tendered, directing the jury to find the issues for the defendant. This motion was also overruled. The plaintiff then moved the court to give to the jury the instruction tendered by him directing the jury to find the issues for the plaintiff and assess his damages at $750. This motion was allowed and the instruction given to the jury. The jury returned a verdict in favor of the plaintiff and against the defendant for the sum of $750. After motion for a new trial was overruled, judgment was entered on the verdict for the sum of $750 and for costs. The defendant prosecutes this appeal to reverse such judgment.

The facts in the case are substantially that Dan Gr. Lee and Anna Lee owned certain real estate and on or about March 1, 1927, such real estate was subject to a mortgage to secure an indebtedness of $20,000. Eighty acres of this land was sold and the sum of $4,000 paid upon the mortgage indebtedness, leaving due the sum of $16,000, which they desired to renew.

Proof was offered that the owner of the notes and mortgage declined to renew same, unless one note for $3,000 was guaranteed by the defendant, C. B. Sawyer. Upon his agreement to guarantee the payment of one note for $3,000 a new mortgage was executed to secure four notes, two for $5,000 each and two for $3,000 each or a total of $16,000.

The note upon which this suit is brought is one of the series and is indorsed as follows: “I hereby guarantee the payment of the within note until paid.” Under such indorsement are the signatures of Dan G-. Lee, Anna Lee and C. B. Sawyer. Considerable space intervened between the indorsement quoted and the signatures. Subsequently an additional indorsement was stamped on the note above the signatures and below the above indorsement, as follows: “For value received we hereby guarantee the payment of the within note at maturity or at any time thereafter, with interest at the rate of - per cent per annum until paid, waiving demand, notice of nonpayment and protest.”

The interest was paid for the first two years but thereafter default was made in the payment of the notes secured by the trust deed and interest thereon. A chancery suit was filed in the circuit court of Kankakee county to foreclose the trust deed.

Subsequently a decree of foreclosure was granted and the amount found to be due was $18,363. It was ordered that the defendants therein or some of them pay said sum and costs within five days and in default thereof that the premises be sold. The moneys were not paid and the master in chancery of said court offered the premises for sale and did sell the same to the plaintiff herein for the sum of $14,864.16. This sum was insufficient to pay the total indebtedness and costs. The deficiency is $4,000. This suit was then filed against the defendant, C. B. Sawyer, as guarantor of the note above described.

It is urged that the trial court erred in permitting the plaintiff to introduce in evidence the note above described and contract of guaranty thereon signed by the defendant, because the contract of guaranty last above referred to had been placed above the signatures after the signing of the instrument by the defendant and that such act amounted to an alteration and voided the contract of guaranty.

It is admitted by the defendant that at the time he placed his signature on the note the words “I hereby guarantee the payment of the within note until paid” were indorsed thereon. The added guaranty indorsement so stamped upon the note is not materially different from the original indorsement and in no way discharged the defendant from his liability upon such original guaranty contract so indorsed upon such note at the time he affixed his signature thereto. By the signing of such guaranty contract and delivery the defendant, C. B. Sawyer, became liable to pay the note in accordance with the terms and conditions of the guaranty and no subsequent act of the parties or any of them altered or changed such liability.

In Weger v. Robinson Nash Motor Co., 340 Ill. 81, at page 90 the court held that “a contract guaranteeing the payment of a note is an absolute contract, and by it the guarantor undertakes for a valuable consideration to pay the debt at maturity if the principal debtor fails to do so and upon it, if the debt is not paid at maturity, the guarantor may be sued at once.”

Again it was also held in the same case (page 90) that ‘ ‘ Guarantors must be regarded as original promisors, who bound themselves to pay the notes when they matured, and their duty was, on their maturity, to go to the holder and take them up, and their liability was not to depend upon the prosecution of suit against the maker.” (Beebe v. Kirkpatrick, 321 Ill. 612; Holm v. Jamieson, 173 Ill. 295; Gage v. Mechanics’ Nat. Bank, 79 Ill. 62.)

It is also provided by statute in this State that “the holder (of a note) may convert a blank indorsement into a special indorsement by writing over the signature of the indorser in blank any contract consistent with the character of the indorsement.” Cahill’s St. ch. 98, ¶ 55.

The admission of such note and indorsement thereon into evidence was not error nor is there a variance between the proof and the instrument.

Defendant also insists that the trial court erred in directing a verdict in this case for the plaintiff for the sum of $750 because there were four notes secured by such trust deed, while the defendant had guaranteed but one of such notes.

This contention is without merit. The plaintiff proceeded to exhaust the security (other than the defendant’s guaranty) before calling upon the defendant to pay the note or any part thereof, and the defendant received pro-rate credit for the proportionate share of the proceeds of such other security. After receiving such credit there yet remained a deficiency on the note in question in the sum of $750 and the court properly directed a verdict for such sum.

It is contended (but not urged) by the defendant that this note was one of a series and that payment of the others was payment of this, but the remaining notes of the series were not paid in full by the moneys received from such foreclosure.

Had the trial court refused to require this pro-rate credit to the defendant for the proportionate share of the proceeds received under the foreclosure sale, then the defendant would have been liable for the full face value of the note and interest thereon under his guaranty contract indorsed on such note. It was at the instance of the defendant that the evidence of the foreclosure suit was produced and its production was for the apparent purpose of preventing the loss of such proportionate credits upon such note.

It is insisted, however, that even conceding that the trial court correctly directed a verdict for the plaintiff, it erred in the amount found to be due. In arriving at the amount for which verdict was directed, the court took into consideration the fact that the plaintiff in this suit had received under the mortgage foreclosure the entire amount due upon all notes for debt, interest and costs, except the sum of $4,000 and after allowing to the appellant herein full credit for his proportionate share of the entire proceeds of the sale, properly directed a verdict for the proportionate amount of the deficiency of $4,000 due from him.

It is contended that no part of the costs should have been taken into consideration before determining the amount due from the defendant but such is not the rule. To subject the security (other than the defendant’s guaranty contract) to the payment of debt it was necessary to resort to the courts and the costs of such proceeding are properly deducted before any credit is to be made on the notes or any of them, and we hold that the defendant is liable for the unpaid balance upon the note in the sum of $750. It is therefore apparent that the trial court did not err in directing a verdict for the sum of $750.

Appellee has assigned cross error and urged that the trial court should have directed a verdict for $3,519. If such action was an error, and we do not so hold, it is apparent that the appellee herein cannot be heard to urge such a contention since it was at his instance" and request that the directed verdict was made and he cannot now be heard to state such act as error.

The judgment of the circuit court of Kankakee county is affirmed.

Affirmed.


author: Mr. Justice Eldredge

text:
    American Investment Company of Illinois and American Banking Company for the Use of Said American Investment Company of Illinois, Appellees, v. United States Fidelity and Guaranty Company, Appellant.
    Gen. No. 8,551.

      Opinion filed April 27, 1932.
    Rehearing denied October 4, 1932.
    Hoopes & Pefferle, for appellant.
    Barber & Barber, for appellees.
   Mr. Justice Eldredge

delivered the opinion of the court.

Appellees recovered a judgment for $26,542.30 against appellant on a blanket bond or fidelity policy guaranteeing appellees against loss of money or securities by reason of the dishonesty of their employees, which, it is claimed, included one Luman Burch.

The bond in question is what is termed “Bankers’ Blanket Bond.” The provisions of this bond so far as they are pertinent to the issues in this case are as follows:

“Section 1. The United States Fidelity and Guaranty Company, a corporation of the State of Maryland, with its Home Office in the City of Baltimore, Maryland, hereinafter called the Underwriter, in consideration of an annual premium agrees to indemnify American Investment Company of Illinois, a Delaware Corporation, and/or American Banking Company, A. T. I. M. A. Springfield, Illinois, hereinafter called the Insured, against the direct loss, sustained while this bond is in force and discovered as hereinafter provided, of any money or securities, or both, as defined in Section 5 hereof, in which the Insured has a pecuniary interest, or held by the Insured as collateral, or as bailee, trustee of agent, and whether or not the Insured is liable therefor (such money and securities being hereinafter called Property), in an amount not exceeding......................................... Twenty-Five Thousand....................dollars ($25,000.00), as follows:

“A. Through any dishonest act, wherever committed, of any of the Employees, as defined in Section 6 hereof, whether acting alone or in collusion with others.

“B. Through robbery, burglary, larceny (whether common-law or statutory), theft, hold-up or destruction (however or by whomsoever such destruction may be caused, and whether it be effected with or without violence), while the Property is actually within any of the offices of the Insured covered hereunder, or is actually within any recognized place of safe deposit within the United States; or is actually within the premises of any of the Insured’s correspondent banks within the United States; or is actually within the premises of any transfer or registration agent within the United States for the purpose of exchange, conversion, registration or transfer in the usual course of business.

“0. Through robbery, larceny (whether common-law or statutory) theft, or hold-up by whomsoever committed while the Property is in transit within twenty miles of any of the Insured’s offices covered hereunder and in the custody of any of the Employees, or through negligence on the part of any of the Employees having custody of the Property while in transit as aforesaid. The Property shall be deemed to be in transit from the moment the transporting Employee or Employees actually depart from the office or premises at which the Property shall be received up to the moment of delivery at its destination.

“Sec. 6. The word ‘Employees’ as used herein shall be deemed to mean the officers, clerks, and other persons in the immediate employ of the Insured during the currency of this bond at its office or offices covered hereunder, but not to mean any person or persons employed by any other banking institution which the Insured shall have taken over, unless the Underwriter shall have given its written consent thereto, nor to mean any persons, firms or corporations furnishing transportation, trucking, messenger service or the like, or any person or persons employed thereby.

“Sec. 7. This bond does not cover—

“a — Any loss resulting directly or indirectly from forgery, unless the forgery be committed by or in collusion with one or more of the Employees.

“b — Any loss through larceny or theft committed by any person to whom any Employee shall have, otherwise than through dishonesty, delivered property or extended credit.

“c — Any loss resulting directly or indirectly from any of the following causes: insurrection, riot, or civil commotion (unless the Property is lost while in the custody of an Employee under the circumstances defined in Paragraph 0 of Section 1 hereof, and unless, when such employee was dispatched, there was no knowledge on the part of the Insured, or its officers or partners, of such insurrection, riot or civil commotion), earthquake, volcanic eruption or similar disturbances of nature, military or usurped power.

“d — Any loss resulting directly or indirectly from the act or acts of any director of the Insured, other than one employer as a salaried official, or of any partner of the Insured.

“e — Any loss of Property, unless prior to the occurrence of such loss ah Employee or Partner of the Insured shall have examined such Property and made a record thereof, which shall contain the nominal value and description of such Property and be sufficient for the purpose of determining the amount of such loss. It is understood that this clause shall not apply to any loss of Property which the Insured shall show to have occurred on the date of the receipt of such Property by or on behalf of the Insured, nor shall it apply to loss of property owned by the Insured.

“f — Any loss resulting from authorized or unauthorized transactions in Foreign Exchange arising out of fluctuations in such Exchange.

“h — Any loss of Property contained in customers’ safe deposit boxes, unless such loss be sustained through any dishonest act of an identifiable employee under such circumstances as shall make the Insured legally liable therefor.

“Sec. 8. No statement made in the application -for this bond or otherwise submitted by or in behalf of the Insured shall be deemed a warranty of anything except of the fact that the statement is true to the best of the knowledge and belief of the person making it.

“Sec. 9. The value of any securities for which claim may be made hereunder shall be determined by the average market value of such securities on the day before the discovery of their loss. If the securities have no quoted market value and their value cannot be agreed upon, it shall be determined by arbitrators; one to be selected by the Insured, one to be selected by the Underwriter, and (in the event of their failure to agree upon the amount of the claim) a third to be named by the two so selected. The written decision of a majority of the said arbitrators shall be binding and conclusive; and the total expense of such arbitration shall be borne by the Underwriter.”

The bond carries two riders, paragraph eight of the second rider is as follows:

“8. This Bond Does Not Cover:

“Any loss resulting directly or indirectly, from trading, actual or fictitious, whether in the name of the insured or otherwise, and whether or not within the knowledge of the insured, and notwithstanding any act or omission on the part of any employee in connection therewith, or with any account recording the same.”

The bond itself and each of the riders purports to have been executed May 27, 1926, but the evidence shows that appellees had been previously carrying a similar bond in another company and that negotiations between them and appellant for the bond in question had been carried on during the months of June and July of that year before the transaction was actually completed, and that the bond and the riders were predated as of May 27, 1926. The evidence further shows that on June 3, 1926, in a letter written by appellant to appellees, reasons are advanced why appellees should take the bond or policy of appellant in preference to the one which they had or had had in the other company. In this letter it is stated among other things: “We are attaching hereto Bankers

Blanket Bond application which we will please ask you to complete in its entirety. We have mentioned elsewhere in this letter, we would like to have a list of your present occasional attorney roster. Will you please give us a memorandum supplementing application, indicating character of business carried on by your parent and subsidiary companies.

“We wish to have a list of your employees, both salaried force and commissioned. . . .

“Premiums must be computed on all employees of every character whose duties relate to banking or require their presence at any time within the banking office. Premium is corrected annually. There are no charge and no deductions for employees temporarily employed or temporarily absent during the year.

“Having now explained chronologically each point under this coverage, we will appreciate your earnest advice as to the final disposition of this matter. ’ ’

In a letter written on the same day supplementing the letter above mentioned appellant wrote in regard to some of the provisions of the purported policy or bond and concludes as follows: “We will appreciate you letting us have completed application as soon as possible.” In response to the above letters appellees on July 13,1926, sent to appellant the supplemental application for the policy as follows:

“July 13, 1926

W. W. Swett, Jr., Insurance Agency,

General Agents,

United States Fidelity & Guaranty Co.,

Springfield, Illinois.

Gentlemen:

In accordance with your request and for the purpose of issuing our Employees Surety Bond, we are submitting herewith the following information.

We desire this bond to be issued to cover the following companies:

American Investment Company of Illinois,

a Delaware Corporation,

and/or American Banking Company.

We have divided representation of the Companies in the following manner:

1— Employees (Salaried force)

2— Brokers (Commission men)

Sub-Brokers (Commission men)

3— Credit Checkers and Collectors

4— Occasional Attorneys.

No. 1 — Employees (Salaried Force)

The following is a list of officers and employees located in the Home Office, Springfield, Illinois. You will note that we have specifically designated our traveling representatives who travel out of the Springfield Office and are on a salaried basis.” (Here follows a list of 73 employees.)

Then under the heading,

“No. 2 — Brokers (Conunission men)

Sub-Brokers (Commission men) ”

are listed brokers and their employees in the States of Iowa, Missouri, Illinois, Kansas and Michigan. Among those listed in Michigan are:

“Michigan

Grand Rapids, Michigan

Curtis & Clark, Inc., Brokers

A. G. Curtis

B. H. Clark

Huida Gen, Employee

Eva Somervill, Employee

Jack Carpenter, Employee

John McRae, Employee

M. L. Hall, Employee

Mt. Pleasant, Michigan

Luman Burch, Broker

Bose Marie Hagen, Employee”

Then follows list No. 3 of 26 credit checkers and collectors in different towns in the States mentioned. List No. 4 relates to occasional attorneys.

The premium for the bond was based or computed upon this list of employees and amounted to $2,311.16 for the first year. The premium for the second year, by reason of the reduction of the number of employees, was $1,723.21.

In the declaration as amended it is alleged that the plaintiffs and each of them were engaged in the business of discounting and purchasing promissory notes given for a part of the purchase price for motor vehicles and secured by conditional sale agreements or chattel mortgages on motor vehicles, and in said business employing various persons to investigate the facts pertaining to the trustworthiness and credit of the makers of said notes and the existence, ownership, possession, and other relevant facts pertaining to the motor vehicles securing said notes, and were desirous of obtaining indemnity against loss of money and/or securities through any dishonest act or acts of any of the plaintiff’s employees whether acting alone or in collusion with others; that plaintiffs were then and have ever since continued to he engaged in the business of purchasing and discounting secured promissory notes and holding the same for investment and collecting said notes, repossessing, only where necessary, the motor vehicles securing such notes and selling, exchanging and disposing of such motor vehicles so repossessed; and neither the plaintiffs, nor either of them, have sold any notes or securities or engaged in the business of buying or selling of securities; and that the defendant made and executed its blanket bond or guaranty policy, and for a good and valuable consideration, paid to it by the plaintiffs, delivered the same to the plaintiffs, and thereby then and there in and by said blanket bond or policy guaranteed to indemnify the plaintiffs and each of them against the direct loss of any money or securities, or both, through any dishonest act of any of the employees of the plaintiffs or either of them, whether acting alone or in collusion with others, which said blanket bond or policy together with the riders thereto attached is as follows, to wit: (Here the bond and riders are set out in haec verba.)

It is further alleged that the employees covered by said bond were specified in a certain letter written by the plaintiffs to the defendant, a copy of which is ' attached to the declaration and made a part thereof; that thereafter, while said bond was in full force, one Luman Burch was in the employ of the plaintiffs to aid the plaintiffs in, and to investigate the facts and make recommendations in respect to, the purchase from regular dealers in motor vehicles of promissory notes given for a part of the purchase price for such motor vehicles and secured by reservation of title thereto in a conditional sale agreement, and said Burch well knew that the plaintiffs desired to purchase only promissory notes signed by persons of lawful age and good credit standing and in actual possession of the motor vehicle described in the conditional sale agreement securing such note, such note being a first and valid lien on such motor vehicle; yet, said Burch conspired with C. C. Ruble, Frank H. Quinlan and Robert Burns (the said Ruble and Quinlan each being a dealer in motor vehicles), and each of them, to procure, by means of false representations and other dishonest acts, money and securities from the plaintiffs, and pursuant to such conspiracy did unlawfully and dishonestly devise and put into practice a scheme and artifice to so defraud the plaintiffs by procuring the signatures severally of divers persons to contracts for the purchase of automobiles from said Ruble or said Quinlan and promissory notes evidencing the purchase price and conditional sale agreements securing payment thereof, which automobiles were not owned or possessed by the person or persons purporting to sell the same, the description thereof in each case being entirely false, erroneous and fictitious, and the person in each case signing the contract as purchaser knowing that the automobile named therein was not to be delivered or sold to him, nor was he expected to pay for such supposed automobile, the sole reason for the signatures on said contracts, notes and conditional sale agreements being to permit and enable said Luman Burch and his said coconspirators to use such contracts, notes and conditional sale agreements, respectively, so signed, as a basis and means of dishonestly obtaining money and securities from the plaintiffs; and the said Luman Burch, in each such case, forwarded by mail to the plaintiffs or to one of them the said contract for purchase, conditional sale agreement and promissory note, well knowing the same to be false, fictitious and fraudulent and without consideration and not bona fide, and forwarded therewith a draft on the plaintiffs for the purchase price for such promissory note and conditional sale agreement and a statement in writing and recommendation signed by the said Luman Burch, containing a description of the motor vehicle on which such note was secured, representing that the purchaser and maker of the note was in each case of lawful age, and a person of good standing in the community, a good credit risk, had the financial ability to pay the obligation therein forwarded, and was in actual possession of such motor vehicle, and also furnishing names of responsible persons as the source of his (said Burch’s) information; that in each such case said Burch well knew that said representations and each of them made by him to the plaintiffs were false, and that the persons. whose names were given as the source of his information were not consulted by him in reference thereto, and that said representations were given for the sole purpose of enabling the said Burch and the said persons so conspiring with him to obtain money and securities from the plaintiffs; that the plaintiffs or one of them received said promissory notes, conditional sale agreements, statements and representations, and in reliance on the genuineness thereof and the truth of the representations therein contained, honored the said drafts for the purchase price, paying said purchase price in each case in cash or in securities consisting of bank drafts commonly known as exchange, which money and securities thereby were obtained by the said Burch, Ruble and other persons so conspiring with them to cause the plaintiffs or either of them to lose said moneys and securities and by means of the said dishonest acts of the said Burch the plaintiffs in each case lost the said money and securities so paid in honoring said drafts; the name of the supposed purchaser and maker of such promissory note, the date thereof, the amount of money or securities obtained therefor, from, and lost by, the plaintiffs, being in each case as follows, to wit: (Here follows a list of 66 fraudulent transactions resulting in a loss to appellee of more than $35,000.)

To the amended declaration appellant filed the plea of the general issue and nine special pleas.

The court sustained demurrers to all of the special pleas. Appellant abided by said pleas and a jury having been waived, the cause was tried by the court. All the material facts were admitted by stipulation. On December 15,1927, Burch and Ruble were convicted in the federal court for the eastern district of Michigan for using the mails to defraud in connection with the transactions at issue in this case, for which they were-sentenced, and the stipulation also provided that the transcript of the testimony in the criminal case in the federal court could be admitted on the trial of this case.

The second, fourth and fifth special pleas alleged in different ways that Burch was not guilty of the conspiracy and other crimes charged in the declaration. The demurrer to these pleas was sustained on the ground that they amounted to the general issue, and we do not understand that any error is now urged on account of the action of the court in this regard. In any event the court admitted all the evidence in regard to the facts alleged in said pleas under the plea of general issue and no harm resulted to appellant by sustaining the demurrer thereto.

The first special plea alleged that Burch was not an employee of appellees but was a broker, and that, therefore, any dishonest acts committed by him were not covered by the bond.

The third special plea alleged that Burch did not receive any of the money or proceeds from any of the transactions but that the money was retained by Ruble, Quinlan and Burns.

The sixth special plea sets out the rider attached to the bond hereinabove mentioned and alleges that the losses to appellees arose from the conduct of Burch, who at the time of the alleged dishonest acts set forth in the declaration, was engaged in trading and the buying and selling of the promissory notes purchased by the plaintiffs and referred to therein.

The seventh special plea contains the same averments as set out in the preceding plea but also alleges that at the time and times mentioned in the declaration relating to the purchase of promissory notes by appellees and prior and subsequent thereto that the American Investment Co. was engaged in trading and particularly was engaged in buying and selling promissory notes and in buying notes and selling the same to the American Banking Co., and that the American Banking Co. was engaged in' trading and particularly was engaged in the buying and selling of promissory notes and in selling the same to the American Investment Co., and that said losses complained of arose while the appellees or one of them was engaged in trading and in the buying and selling of promissory notes.

The eighth special plea alleges that the losses to appellees were a result of the fictitious trading of Ruble, Quinlan and Burns and the alleged dishonest acts of Burch in connection therewith.

The ninth special plea alleges that the losses complained of resulted from the trading of appellees and the said Ruble, Quinlan and Burns and the dishonest acts of Burch.

With the exception of the third special plea, it is apparent that the remaining special pleas, to wit: the sixth, seventh, eighth and ninth, involve mostly questions of law relating to the legal construction of the contract and that such questions of fact as might possibly be involved herein could be (and in fact were) admitted in evidence under the plea of the general issue. As to the third special plea it sets out no defense whatever because it would be immaterial whether Burch received any of the money or securities procured as a result of the conspiracy to defraud. The court did not err in sustaining the demurrers to these last mentioned pleas and to avoid a repetition of the discussion of the matters sought to be established by them, which will be hereinafter considered, no further comment in regard thereto will be made at this time.

The proofs show beyond all reasonable doubt that Burch entered into a conspiracy with Ruble and others to defraud appellees of their money. His culpability is substantiated to a great extent by his own confessions and admissions in his testimony given in the federal court. The modus operandi of the conspiracy is disclosed by the stipulation of facts, which, in so far as the errors presented by this appeal are concerned, it is necessary to consider, and is substantially as follows :

“1. That the Purchasers’ Statements, and Conditional Sales Contracts in form hereto attached as Exhibit ‘A’ used in connection with the several time credit deals enumerated in the first count of the declaration were filled out by C. C. Ruble who was the automobile dealer at Coleman, Michigan, from whose purported sales the several deals originated; that in each such transaction the Purchasers Statement and Conditional Sales Contract after being prepared by Ruble (or by someone at his direction) was signed by the purported purchaser; that Luman Burch filled in the blanks in the ‘ Recommendation ’ on the reverse side of the Purchasers’ Statement and in each instance represented that he had investigated the credit standing of the Purchaser and had consulted the references contained in the Purchaser’s Statement and in each case quoted the parties referred to as considering the Purchaser in substance as prompt pay or a good credit risk; that Luman Burch did not in fact investigate the credit standing of any such purchaser and did not consult the persons or bank as credit references and that the statements ascribed to such persons or bank were substantially false and the purchasers were not in fact good credit risks.

“2. That the purporting automobiles described in said several Conditional Sales Contracts and Purchasers Statements were fictitious and nonexistent or had been sent to some other territory and in no case had been delivered to the purporting purchaser in such Conditional Sale Contract except as to deals numbered 26, 32, 34, 45 and 61, of said first count of declaration in which excepted instances the automobile had been previously sold or pledged to some other person so that the Conditional Sale Contracts in question did not create any valid interest in or lien thereon, and even in such excepted cases said Burch made no investigation as to credit standing or references.

“3. That the said Purchasers Statement and Conditional Sale Pentracts were delivered by said Ruble to said Burcb and the completed papers delivered by Burch to Ruble with a draft filled out and signed by Burch drawing on the American Investment Company of Illinois (and in a few cases on American Banking Company) for the sale price of the paper; the papers with the draft attached were then deposited by Ruble to his credit in his local bank which in turn forwarded the papers to Plaintiff’s bank in Springfield, Illinois, where the papers were received and the draft honored and paid by Plaintiffs; in two instances, however, draft was indorsed by Ruble and left with Burch who then deposited the same to his own credit in a Mt. Pleasant Bank; that Coleman, Michigan, where Ruble had his place of business, is nineteen miles distant from Mt. Pleasant, Michigan, where Burch lived and had his insurance office.

“4. Plaintiff as at the time of purchase of said papers sustained net losses on each of said transactions in the sum placed opposite the names of the makers and dates of said Conditional Sale Contracts in the first count of the declarations.

“5. Either Plaintiffs or defendant may offer in evidence any of the testimony or exhibits offered in evidence in the case of People of the United States vs. C. C. Ruble, Luman Burch, Robert Burns, et al., in the United States District Court for the Eastern District of Michigan, in like manner as if the particular witnesses testified or exhibits were offered in this case subject only to any objections as to relevancy or competency, waiving all objections as to forms; . . .

“7. That the residence of the purporting purchasers in said Conditional Sales Contracts was in each case six or more miles distant from the City of Mt. Pleasant, Michigan, and in most cases at Coleman, Clare and Rosebush, Michigan, respectively nineteen, fourteen and seven miles distant from Mt. Pleasant, Michigan.

“8. Either party may offer additional evidence on the trial of said cause.

“9. That at the time of the transactions here involved American Investment Company of Illinois was, and still is, a Delaware corporation authorized to transact business in the states of Illinois and Michigan, and engaged in the business of purchasing time payment paper given for the purchase price of motor vehicles secured by conditional sale agreements and other liens thereon; and the American Banking Company was a banking association organized under the laws of Illinois, all the stock thereof, except shares to qualify its officers, being owned by said American Investment Company of Illinois; and that paper so acquired by the American Investment Company of Illinois was held by it for collection and none of said paper or conditional sale agreements were sold by said American Investment Company of Illinois, or by said American Banking Company.

“10. That the defendant United States Fidelity and Guaranty Company, a corporation of Maryland, executed and delivered to the plaintiffs the blanket bond or guaranty policy, together with the riders following the same, set forth in the first count of said declaration; that the employees, brokers and sub-brokers of the plaintiffs alleged to be covered by said policy were specified in a letter of July 13, 1926, written by A. E. Eyan, secretary of each of the plaintiffs, to the general agents of said defendant (a true copy of which letter is attached to the declaration herein, and the original of which was duly received by the defendant;) that all premiums and rates quoted by the defendant were paid by the plaintiffs for said policy, and said policy continued in full force until terminated by written notice given by the defendant to the plaintiffs dated October 26, 1927, under section 12 of said bond or policy. ’ ’

Burch was originally employed under a written contract dated April 1, 1926, as a subbroker under Curtis & Clark, Inc., to solicit and procure from automobile dealers conditional sale contracts evidencing the purchase price of motor vehicles and secured by first lien thereon, and to submit the same for purchase to appellees, he to receive a commission of one-half per cent of the face amount of the paper purchased and also one and one-half per cent on collections. The contract with Curtis & Clark provided that he agreed under instructions from Curtis & Clark, Inc., to solicit and procure from automobile dealers promissory notes of purchasers of motor vehicles secured by a first lien upon automobiles and submit the same for purchase by the company, all to be upon such forms and upon such terms and conditions as the company may from time to time direct. This written contract commences as follows:

“This Contract, made April 1st, 1926, by and between Curtis & Clark, Incorporated hereinafter for brevity called the ‘Company’ and Luman Burch hereinafter for brevity called the ‘Broker,’ Witnesseth, That:” The evidence further shows that through some agreement between Curtis & Clark, appellees and Burch the latter acted as the local agent for appellees working directly for them and that the drafts and contracts connected with the purchase of the automobile notes were received by appellees directly from Burch and not through Curtis & Clark. He was furnished with certain forms to be used in the purchase of said notes. On the reverse side of each form was a recommendation form to be filled in and signed by him. The following is an example of one of the fraudulent recommendations made by Burch :

‘ ‘ Recommendation Form

(For Use by Representative)

Dated at Mt. Pleasant, Mich., Dec. 10, 1926

Name of Applicant Wm. Barnhart.

Do you personally know Applicant? Yes.

Have you investigated his Credit Standing? Yes.

Give general character or reputatioh of district or neighborhood in which Applicant lives. Good. Is employed? Yes.

What is the nature of the information obtained from references? (Give in detail.)

1. ' State Bank of Coleman: Good credit account. Takes care of paper promptly.

2. James Carty, Grocer, Coleman: Good pay. Generally cash.

Remarks:

(Giving delivered price, down payment and unpaid balance)

Is he of legal age? Yes. Is he an habitual user of intoxicants? No. Is he an employee or Proprietor of Soft Drink Parlor? No. Has he a Police Record? No. How does he pay his obligations? Prompt. Do you recommend the loan? Yes. First class paper. Makes big money. Luman Burch, (Representative).”

The first point made in the argument of appellant is: “The bond sued on does not cover all loss or damage sustained through a dishonest act, but is limited to the loss of specific, tangible property of the kind specified, namely, securities or money, as those terms are defined in the bond. It only covers’ the loss of certain physical things. It does not cover a loss occasioned by the insured being induced to invest in a security which afterwards proves worthless.”

Counsel for appellant argue at great length that the bond only contemplated losses arising by reason of loss of securities after the assured had obtained the securities and not losses arising out of a transaction involving the obtaining or purchase of securities or obtaining securities as collateral to notes purchased by the assured, and that a recovery cannot be had under the bond by showing that the assured suffered the loss, not by the loss of the security, but by taking of a security which due to its fictitious nature turned out to be worthless, because appellees never lost the notes or fictitious chattel mortgages or conditional sales contracts but still have the notes, mortgages and contracts. However sound this contention may be, it ignores the fact that the bond insured appellees against the loss of money by reason of any dishonest act by one of its employees. Burch not only shared with his coconspirators in the money paid by appellees for the fictitious securities in question but also fraudulently obtained from appellees his commissions on the fictitious transactions. There is little difference in principle in obtaining money from a person by fraud than by larceny. In either case it is a dishonest and criminal act.

It is also contended that no recovery can be had because the bond provides that appellant is not responsible for any loss resulting directly or indirectly from trading actual or fictitious, whether in the name of the insured or otherwise. The word “trading” ordinarily implies a purchase and sale. In this case nothing was bought and nothing was sold by Burch nor his co-conspirators. It is admitted in the stipulation of facts that appellees did not buy these securities for the purpose of selling the same and did not sell them but simply purchased them for an investment. Crime has not yet been dignified by the name of trade. If this rider should be given the construction sought to be placed upon it by appellant, then it would practically annul all the provisions therein for the protection of the assured. Appellant, however, has placed its own construction on the coverage extended by the bond. In its letter to appellees of June 3, 1926, which has been heretofore referred to, it states, “The salient point of this coverage is as follows: Covers direct loss. Covers any dishonest act of any employee. Covers business in which the insured has a pecuniary interest, or held as collateral, or held as bailee or trustee or agent whether legally liable or not.” The bond itself states that appellant agrees to indemnify appellees in the loss of money or securities or both in which the insured has a pecuniary interest in an amount not exceeding $25,-000 through any dishonest act of any of the employees, as defined at section 6 thereof, whether acting alone or in collusion with others. Where two provisions in an insurance policy or bond are antagonistic and inconsistent with each other, that provision will be enforced which favors the protection of the insured.

It is also urged that Burch was a broker and not an employee and therefore not covered by the bond. In the letter of June 3, 1926, written by appellant to appellees it said: “In a copy of your letter of November 21st, 1925 to the Integrity Mutual, you have divided the representatives of your company in the following manner: — 1. Employees (salaried force) 2. Agents (commission men) Sub-agents (commission men) 3. Representatives 4. Occasional Attorneys.

“In checking over your list of the ones located in your home office here in Springfield, which are the ones on the salaried basis, you have added the name of Mr. F. E. Coble. This will make fifty-three (53) employees under class No. 1; sixty-five (65) under class No. 2; making a total of 118. This number enters into the basic make-up of your Bankers Blanket Bond rate.

“Under class No. 3 you have forty-six (46) representatives, and under class No. 4 there are, I believe, fifty (50) occasional attorneys indicated. . . .

“Basing the cost of Bankers Blanket Bond form No. 2 on the above factors of exposure, and the number of employees, agents, subagents, representatives and occasional attorneys indicated in your file which you were good enough to let us have, the final bond computation is, and arrived at, as follows:

Class Nos. 1 and 2:

Twenty-five (25) employees.........$625.00

Twenty-five (25) employees (26 to

50) @ $15.00 ea................ 375.00

Fifty (50) employees (51 to 100)

@ $10.00 ea.................... 500.00

Eighteen (18) employees (101 to 200)

$5.00 ea....................... 90.00

Basic rate....................$1590.00

Adding 25 per cent over basic rate

for form No. 2 ................ 397.50

$1987.50”

In this letter appellant also states: “We are attaching hereto Bankers Blanket Bond application which we will please ask you to complete in its entirety. *** Will you please give us a memorandum supplementing application, indicating character of business carried on by your parent and subsidiary companies.

“We wish to have a list of your employees, both salaried force and commissioned.” In compliance with the above letter appellees by their letter of July 13, 1926, divided their representation of employees as follows: “1. Employees (salaried force) 2. Brokers (commission men) Sub-brokers (commission men) 3. Credit Checkers and Collectors 4. Occasional Attorneys.” Under classification No. 2, “Brokers” and “Sub-brokers,” 31 persons are listed including the name of “Luman Burch, Broker.” Upon this entire list of employees the premium paid by appellees for the policy was computed. Appellant accepted this list without objection to the fact that any of the named persons therein were designated as brokers. In our opinion it makes little difference whether Burch was called an employee, agent or broker, provided he performed the duties of an employee or was recognized by the parties as an insurable risk under the bond. In the contract between Burch and Curtis & Clark, Inc. it is stated that he is called “Broker” for “brevity.” In any event, appellant accepted Burch and 30 other persons designated as “Brokers” as coming within the meaning of the term “Employees” as used in the bond.

The bond with the application and the correspondence between the parties show conclusively that occasional attorneys who might be employed by appellees were also covered by the bond and classified as employees. In the letter of June 3,1926, in discussing what the premium might be appellant states, “Class four is made up of occasional attorneys bonded to the American Banking Company, et al. This coverage is extended to cover fifty (50) attorneys who might be employed from time to time by your company. A coverage extended in the amount of $500.00 only on each of the fifty occasional attorneys. The rate per $100.00 per attorney is $.30. Premium based upon $500.00 only on each attorney for fifty attorneys will be $75.00.” In response to this letter appellees in their letter or supplemental application dated July 13,1926, under the subject of “Occasional Attorneys” state: “We understand that under this classification, we are protected under the coverage of our bond on any occasional attorney used by us in collection matters, in the amount of $500.00. We also understand that it is not necessary to specifically list the attorneys under this classification, owing to the fact that we do not expect to use as many as 50 attorneys at any one time. ’ ’

It is thus conclusively shown that occasional attorneys were accepted as employees within the terms and meaning of the bond and there would be no more reason for holding that Burch, who was nominally listed as a “Broker” and personally named, should not come within the provisions of the bond than an “Occasional Attorney” who was not even individually named.

The next-point contended for by appellant is that the evidence showed that the suspicions of appellees were aroused prior to some of the losses and that they could have prevented the losses by taking reasonable precautions. It is true that the suspicions of appellees were aroused from the fact that Ruhle was apparently selling a very large and unusual number of cars and they wrote to Burch to investigate different transactions and each time Burch replied in a way which tended to allay these suspicions. In regard to one transaction Burch wrote to appellees as follows: “This party first asked this new contract on the Farmers Plan as he has a big crop of beets this year and no doubt will pay up this contract by Feby. . . . This is No. 1 paper.” This statement was entirely false. In regard to another transaction he replied to appellees in the following manner: “This party is O. K. for this car. He and his father own this business and are doing a fine business. Car good security. ” All of which was false. The record contains many other such instances. On December 3, 1926, appellees wrote to Burch in regard to Ruhle selling too many cars in which they stated: “If we did not have considerable confidence in yonr ability to select and purchase good paper, we believe we would cut out this dealer’s account altogether.”

The evidence shows that as late as February 16, 1927, appellees still retained confidence in Burch’s integrity, but in the spring of 1927 they instituted an investigation which resulted in the disclosure of the true state of facts and the collusion of Burch, Ruble and others. In view of the above facts the claim that appellees were guilty of laches is without merit.

It is further contended that under the terms of the agreement between Burch and appellees the former was not required to make a personal investigation in regard to the makers of the notes and his failure to do so was not a dishonest act. In answer to this contention the evidence fairly tends to show that it was his duty to make such investigations and report truthfully the result thereof. He never at any time claimed that such was not his duty nor refused to do so. He fraudulently pretended to make such investigations and made false reports as a result thereof. It makes no difference whether it was his duty to make such investigations if in fact he pretended to do so and made false reports to appellees for the purpose of defrauding them of their money. In such case he was guilty of a dishonest act whether it was his duty to make such investigations or not.

Finally it is suggested that the court erred in admitting incompetent evidence over the objection of appellant. The particular evidence objected to is not pointed out and we have no means of knowing what evidence appellant claims was incompetent. In any event, however, the trial was had before the court without a jury and the court is presumed to have considered only the competent evidence.

We find no reversible error in the record and the judgment of the circuit court is affirmed.

Affirmed.


text:
    The People of the State of Illinois ex rel. Birel Milburn et al., Appellants, v. E. Perry Huston et al., Appellees.
    Gen. No. 8,610.

      Opinion filed April 27, 1932.
    Rehearing denied October 4, 1932.
    Charles F. Tym, State’s Attorney, Wilber H. Hickman and Craig & Craig, for appellants.
    O’Hair & McClain and Van Sellar & McClain, for appellees.
   Mr. Justice Eldredge

delivered the opinion of the court.

The appellants filed a petition for leave to file an information in the nature of quo warranto charging that E. Perry Huston usurps the office of mayor of the City of Paris and that Joseph Haase, Frank E. Morrison, Henry F. O’Bannon and Earl Thomas, each respectively, usurps the office of commissioner of said city. Respondents filed written objections to the allowance of the prayer of the petition which objections were supported by five affidavits. The objections were overruled by the court and the information was filed. Respondents, who are appellees on this appeal, have assigned cross errors to the effect that the court erred in granting leave to file the information. Affidavits in support of such objections do not become a part of the record unless preserved by a bill of exceptions which was not done in this case and therefore this court is precluded from reviewing the action of the court in overruling said objections and granting leave to file the information and the cross errors are consequently overruled.

It is alleged in the petition for leave to file the information that the election by which respondents claim to hold their offices, as mayor and commissioners respectively, was void for two reasons: (1) that neither on the back nor outside of any of said ballots, so as to appear when folded, nor at any other place on said ballots, was there printed or written the designation of the polling place for which the ballot was prepared, and for that reason none of said ballots complied with the election laws in force in said City of Paris bnt were each and all illegal and invalid and said election was therefore wholly null and void, and that the said returns on said election and canvass thereof were based upon said illegal and invalid ballots; (2) that none of said ballots were printed upon plain white paper through which the writing or printing could not be read nor upon plain, substantial white paper, but each and all of said ballots were printed upon unsubstantial, thin and flimsy white paper through which the writing or printing could be read and so transparent that the printing and marks in front of the names of the candidates on said ballots could be seen and read through the back of the ballot without holding the same up to the light and could be seen and read by merely looking at the back of each ballot, when said ballot was folded, for what candidate it was marked by the voter, contrary to the election laws in force in said city and for that reason said ballots were illegal and the election was wholly null and void, etc. To the information itself pleas of justification were filed by the respondents to the effect that they held their respective offices by reason of the fact that they had received a majority of the votes cast at said election, that they had each qualified as such officers, and were now, and had since such qualification, been acting as such. To these pleas appellants filed two replications substantially following the averments of the petition for leave to file the information; one in regard to the failure of the ballots to have printed or designated thereon the polling place where such ballots were to be used and the other in regard to the failure to have said ballots printed upon substantial white paper in the manner prescribed by the statute. Respondents demurred to these replications and appellants moved to carry the demurrer back to the pleas, This motion was overruled, the demurrer sustained to the replications and judgment rendered in favor of respondents accordingly.

It is averred in the petition for leave to file the information, in the pleas of respondents and in the replications thereto that the City of Paris duly adopted the commission form of municipal government in the year 1915 and that said election was held April 21, 1931, while said city was operating thereunder.

There are but two fundamental questions involved in this case and they are whether section 14 of the Australian Ballot Law, adopted in 1891 (paragraph 216, ch. 46, Cahill’s Ill. Rev. Stat. 1929) applies to general elections for the mayor and commissioners in cities which have adopted the commission form of municipal government and, if so, whether the provisions for the preparation of the ballots set out therein are mandatory or directory. This section is as follows : “. . . On the back or outside of the ballot, so as to appear when folded, shall be printed the words, ‘Official, Ballot,’ followed by the designation of the polling place for which the ballot is prepared, the date of the election and a fac-simile of the signature of the clerk or other officer who has caused the ballots to be printed. The ballots shall be of plain white paper, through which the printing or writing cannot be read.”

The act specifically applies to municipal elections. Section 1 provides: “That in all elections hereafter to be held in this State for public officers, except for trustees of schools, school directors, members of boards of education, officers of road districts in counties not under township organization, the voting shall be by ballots printed and distributed at public expense as hereinafter provided, and no other ballots shall be used.”

Section 2 provides: “The printing and delivery of the ballots and cards of instruction to voters hereinafter described, shall, in municipal elections in cities ... be paid for by the several cities. . . . The term ‘city election’ shall apply to any municipal election held in a city, village, or incorporated town. ’ ’ The purpose of the act is shown by its title: “An Act to provide for the printing and distribution of ballots at public expense, and for the nomination of candidates for public offices, to regulate the manner of holding elections, and to enforce the secrecy of the ballot.” The act is general in its scope, and embraces, controls and applies to substantially all elections of public officers in the State and unless the act providing for the commission form of government for cities passed in 1910 specifically exempts the election of the officers of cities which have adopted that act from the provisions of the Australian Ballot Act by providing other methods of conducting elections of its municipal officers, and particularly in regard to the preparation of the ballots, it will apply to and control the elections in cities which have adopted the commission form of government.

The only provisions in the act providing for the commission form of government which are pertinent to the issues under consideration are found in sections 18 and 19 thereof. Paragraph (e) of section 18, Cahill’s St. ch. 24, ¶ 340, is as follows: “All general and special municipal elections in said city or village shall be held, conducted and contested under the election law in force in such city or village, except that the contest of the election of mayor and commissioners shall be had, prosecuted and conducted in the County or Circuit Court. The council hereunder shall not be the judge of the election and qualification of its members.” It is provided in section 19: “The said ballots shall be printed upon plain, substantial white paper, and shall comply with the election laws in force in such city or village, except as herein otherwise provided, and shall be headed: . . . Such ballots shall be authenticated and attested on the back thereof in the same manner and form as provided by the election law in force in such city or village.” Cahill’s St. ch. 24, A 341.

The pleadings show that the only law enacted by the City of Paris in regard to the election of the mayor and commissioners was an ordinance designating the polling places for the election and the appointment of the judges and clerks thereof and it is contended that as the act creating the commission form of government provided that all municipal elections in a city which had adopted that act shall be held and conducted under the election laws in force in such city, such elections will'not be controlled by the general election laws of the State but only by such laws as the city may itself have enacted by ordinance. We cannot agree with this proposition. It will not be presumed that the legislature intended to give such municipalities the power to repudiate the general election laws of the State passed to protect the sacredness and privacy of the ballot and, in our opinion, such cities would have no power to adopt any laws in regard to the election of its officers which would be at variance with the public policy of the State as announced by its enactments in regard to general elections. The general election laws, at least in so far as the provisions therein in regard to the preparations of the ballot are concerned, apply to the election of officers of municipal corporations which have adopted the commission form of government the same as they do to the election of all other public officers in this State.

The remaining question which presents itself for consideration is whether the provisions of section 14 of the Australian Ballot Law, Cahill’s St. ch. 46, ¶ 216, which provides that on the back of the ballot, so as to appear when folded, shall be printed the designation of the polling place for which the ballot is prepared .and that such ballots shall be printed on plain white paper through which the printing qr writing cannot be read, • are mandatory or merely directory. The demurrers to the replications admit that there was no designating of the polling places on the ballots for which the ballots were prepared and that the same were printed on paper through which the printing and writing could be easily read. • It has been held in a great many cases in this State that a mere irregularity in the manner prescribed by the statute for holding an election, where no fraud or other harm has been shown and no legal voter had thereby been deprived of his vote, will not avoid an election. People v. Graham, 267 Ill. 426 (and cases cited). In this case it is also held: “A mandatory provision in a statute is one the omission to follow which renders the proceeding to which it relates illegal and void, while a directory provision is one the observance of which is not necessary to the validity of the proceeding. Directory provisions are not intended by the legislature to be disregarded, but where • the consequences of not obeying them in every particular are not prescribed the courts must judicially determine them. In doing so they must necessarily consider the importance of the punctilious observance of the provision in question to the object the legislature had in view. If it be essential it is mandatory. (2 Lewis’ Sutherland on Stat. Const. —2d ed. — sec. 610.) No universal rule can be given to distinguish between directory and mandatory provisions. The controlling question in this as in all other rules of construction is, what was the intention of the legislature? Whether a statute is mandatory or directory does not depend upon its form but upon the legislative intention, to be ascertained from a consideration of the entire act, its nature, its object and the consequences which would result from construing it one way or the other. ” If it is apparent that it was the intention of the legislature that the things prescribed to be done in the preparation of the ballot shall be mandatory then a violation of the act in this regard renders an election void regardless of all other considerations. Section 26 of the Ballot Law, Cahill’s St. ch. 46, ¶ 229, among other things provides: “Mo ballot without the official indorsement shall be allowed to be deposited in the ballot-box, and none but ballots provided in accordance with the provisions of this Act shall be counted.” In the case of People v. Bushu, 288 Ill. 277, it is held: “While it has frequently been held that mistakes or omissions of the officers in charge of the machinery of an election should not defeat the plainly expressed will of the people at such election, yet such has not been held to be the rule where such officers have failed to perform those duties of precaution which safeguard the votes of the people. It is far better that the people of a town shall lose their vote in a single instance than that there shall be written into the law rules which permit election officers to disregard the plain mandates of those provisions of the law intended to protect and safeguard the ballot. A provision requiring the fac simile of the signature of the town clerk or other officer who prepares the ballots is to prevent the fraudulent casting of spurious or illegal ballots. That provision is mandatory, and ballots which do not contain such fac simile are illegal ballots.” In People v. Snedeker, 282 Ill. 425, it was held: “Section 14 of the Australian Ballot law provides, among other things, that ‘on the back or outside of the ballot, so as to appear when folded, shall be printed the words, “Official Ballot,” followed by the designation of the polling place for which the ballot is prepared, the date of the election and a faosimile of the signature of the clerk or other officer who has caused the ballots to be printed.’ (Hurd’s Stat. 1916, p. 1181.) It appears from the record before us that no such printing was on any of the ballots which were cast as to the adoption of the highway commissioner system. As we deem this provision mandatory with reference to the ballots cast at such election, it must be held that this election was invalid for this reason also.” In the case of People v. Illinois Cent. R. Co., 298 Ill. 516, it appeared that there was no designation of the polling places printed on the ballots where they were to be used and the court held: “The notice of the special town election specifically stated that the election would be held at two polling places, describing them. Both the polling places were used at said election and separate returns were made for each.

“Section 14 of the Australian Ballot law (Hurd’s Stat. 1917, p. 1345) provides that certain things shall appear on the outside of the ballot to be voted at such an election, followed by the designation of the polling place for which the ballot is prepared, the date of the election and a fac simile of the signature of the clerk or other officer who has caused the ballots to be printed. There was no attempt to designate on the back of these ballots the two separate polling places. The ballots used, as we understand the record, in both places were identical, without reference as to which was to be used in the respective polling places. Section 26 of the Ballot law provides that ‘no ballot without the official indorsement shall be allowed to be deposited in the ballot-box, and none but ballots provided in accordance with the provisions of this act shall be counted. ’ Under the holding of this court these sections of the Australian Ballot law are mandatory. (People v. Snedeker, 282 Ill. 425; People v. Bushu, 288 id. 277.) It follows that none of the ballots cast at this special election either for the taxes or the bond issue were valid, and therefore neither tax can be sustained as legally authorized. ’ ’ This case is directly in point and conclusive. In so far as we have been able to discover it has been held, in every case where the question has come before a court of review, that the provisions of section 14 of the Ballot Law in regard to the preparation of ballots are mandatory and that elections held with 'ballots not conforming to the conditions prescribed by said section are illegal and void. While nothing’ in the record in this case shows that any fraud was practiced or that any voter lost his vote by reason of the defective ballots, yet, as it was said in People v. Bushu, supra, “It is far better that the people of a town shall lose their vote in a single instance than that there shall be written into the law rules which permit election officers to disregard the plain mandates of those provisions of the law intended to protect and safeguard the ballot.”

It follows that the court erred in sustaining the demurrers to the replications and the judgment of the circuit court is therefore reversed and the cause remanded with directions to carry the demurrers back to the pleas of the respondents and sustain them thereto.

Reversed and remanded with directions.