text:
    Chilton C. Collins et al. A. H. Patek and Lillian Arndt, Appellants, v. Alexander Baim et al., Appellees.
    Gen. No. 40,349.

      Opinion filed March 28, 1939.
    Rehearing denied April 20, 1939.
    Seymour Stedman, of Chicago, for certain appellant ; A. C. Lewis, of Chicago, of counsel.
    Seymour J. Frank, of Chicago, for certain other appellant ; Donad W. Hartford, of Chicago, of counsel.
    Harry A. Biossat, of Chicago, for certain appellee.
   Mr. Justice Friend

delivered the opinion of the court.

A. H. Patek and Lillian Arndt have prosecuted separate appeals from certain orders entered by the superior court in a foreclosure proceeding, and during the pendency of the appeals an order of consolidation was here entered granting them leave to file one record, one abstract and a joint brief.

Patek’s appeal is prosecuted to reverse an order or decree wherein the court denied his claim and dismissed his petition to establish ownership of mortgage bonds in the aggregate sum of $5,500, which are claimed to have been secured by a trust deed executed by Alexander Baim, Joseph J. Bausch and Katherine M. Bausch, who for purposes of clarity are hereinafter referred to as respondents.

Chilton C. Collins, trustee, had filed his bill of complaint September 29, 1931, to foreclose the trust deed executed by respondents, securing an indebtedness of $65,000 evidenced by 149 bonds. None of the respondents appeared to defend, and an order of default was entered against them, the Humboldt State Bank, as trustee, the Humboldt Bond & Mortgage Company and unknown owners, and the cause was referred generally to a master in chancery, who, pursuant to a hearing, recommended that a decree of foreclosure be entered. On December 17,1932, the court confirmed the master’s report and entered a decree finding that appellees were justly indebted to the holders of the bonds in the principal sum of $65,000, and that they owed the aggregate sum of $73,171.23. Among other provisions of the decree it was ordered that after the filing and confirmation of the master’s report of sale and distribution, in case any deficiency was shown in the respective sums due the complainant as trustee, that the court retain jurisdiction for the purpose of entering a deficiency decree for the amount remaining unpaid, if any, against respondents, whom the court found personally liable for the deficiency. The court also retained jurisdiction for .the further purpose of administering the property in the hands of the receiver, to advise and instruct the complainant in respect to his powers and duties as trustee and to provide for the prompt distribution, to the persons entitled thereto under the decree, of all moneys which.should come into the hands of complainant, receiver or clerk of the court under the decree, and to determine all controversies between any two or more persons claiming title to or ownership of or interest in any bonds or coupons issued under and secured by the trust deed being foreclosed.

Almost five years elapsed before the property was sold by the master pursuant to the decree of foreclosure. The master’s report of sale, dated May 17, 1937, recites that the premises were purchased by Ruth McGinnis, that the proceeds of the sale were not sufficient to pay the complainant the amounts found due him for the use and benefit of the owners and holders of the bonds secured by the trust deed, and he reported a deficiency, including interest and costs of $90,412.40. The report of sale was subsequently approved and on July 9, 1937, the court entered a decree finding a deficiency in the foregoing sum, that respondents were jointly and severally personally liable therefor, that Collins, as trustee, have and recover as at common law the amount of the deficiency, and that execution issue therefor.

July 15, 1937, Patek filed the petition which is the subject matter of this appeal, alleging the facts herein-before set forth in relation to the foreclosure proceeding, and in addition thereto that he was the owner and holder of bonds numbered 69 to 76 and 135 to 149, both inclusive, of the face value of $5,500, which with interest added thereto amounted to $8,002.50. He further alleged that a bondholders’ protective committee had been organised and that all the bonds secured by the trust deed, except those held by him, were deposited with the committee pursuant to an agreement dated May 27,1931, but that his $5,500 in bonds were not deposited ; that respondents had theretofore entered into a written agreement with the committee by which they agreed that in consideration of $1,500 to be paid to them by the committee, they were to be relieved of payment on the deficiency decree, and the property being for closed was to be conveyed to Harry Gr. Zimmerman, the nominee of the committee. The petition further alleged that the judgment debtors (respondents) were not entitled to any credit of $8,002.50 due Patek on the bonds held by him, and that the deficiency judgment stands as a lien for the use of petitioner Patek; and he sought an order of court requiring Collins as trustee to assign to him a part of the deficiency judgment of $8,002.50,' or in the alternative that he be authorized by order of court, in the name of the trustee, for his own use and benefit, to proceed to cause the issuance of an execution on the deficiency judgment to recover so much thereof as was claimed to be due him and to be allowed to proceed by garnishment or any other remedy available for the purpose, to collect that part of the judgment represented by his claim for $8,002.50.

July 15,1937, Patek ordered an execution which was returned nulla bona, and four days later a garnishee summons issued running against the Northern Trust Company and certain individuals and was served upon them.

July 26, 1937, within 30 days after the entry of the deficiency decree against respondents, Baim filed his answer to Patek’s petition, denying that Patek was the holder and owner of bonds 69 to 76 and 135 to 149, both inclusive, and he averred that pursuant to an agreement with Collins, as trustee, these bonds, aggregating $5,500, were to remain unissued and not sold to the public, but were to be held by Collins and that they were never issued and never became a liability on the part of Baim, but remained in the possession of Collins or his representatives up to within approximately three weeks of the filing of the petition. His answer further averred that when these $5,500 in bonds were received by Patek they were overdue and subject to all defenses, and that the respondent Baim had a good and meritorious defense to all Patek’s bonds. He denied that petitioner was entitled to a claim of $8,002.50, or any amount whatsoever, and prayed that upon hearing the decree should be modified and the deficiency against him should be satisfied in full and released.

Patek’s petition and Bairn’s answer thereto, together with the petition of Lillian Arndt, which is the subject matter of the other appeal, were referred to a master in chancery who filed his report May 3, 1938, and May 5 of that year the court entered the decree from which these appeals are prosecuted, finding that no deficiency should be entered against respondents, that the garnishment proceedings instituted upon the deficiency decree be dismissed, and that the question of costs to be assessed should be reserved for the further consideration of the court. .

As to Patek’s appeal it is urged (1) that the court lacked jurisdiction to amend, change or set aside the final decree after the term; and (2) that the findings of the decree entered May 5,1938, pursuant to the second reference to the master are not supported by the evidence and are contrary to the greater weight of the evidence. As to the jurisdictional question, the record discloses that pursuant to the decree of foreclosure entered December 17,1932, Bairn entered into an agreement with the bondholders’ committee February 21, 1933, which provided that the title to the premises involved in the foreclosure suit should be conveyed by respondents to the committee or its nominee, Harry Gf. Zimmerman, in return for which the committee was to release or waive any personal deficiency against respondents, applicable to all bonds then on deposit with the committee or which might thereafter be deposited. There had been deposited with the committee $53,300 of the bonds. This represented the entire issue except $11,700, of which Patek claims $5,500, represented by bonds 69 to 76 and 135 to 149, both inclusive. Lillian Arndt, the other appellant, claims bonds 77 to 88 and 133 and 134, both inclusive, aggregating $6,200, thus making up the total of $65,000 principal amount of bonds described in the trust. No other bonds are involved except those deposited with the committee and those upon which the claims of Patek and Arndt are predicated. Bairn’s agreement with the bondholders’ committee was made shortly after the original foreclosure decree was entered and, as heretofore said, it provided that there should be no liability on deposited bonds. Patek’s entrance into the proceeding in July, 1937, created a new factor in the situation not known to Bairn, and which arose after the decree of foreclosure and after the agreement with the bondholders ’ committee was effected, and of course Bairn had no way of protecting himself against Patelc’s subsequent claim, nor did he have any notice thereof at the time of the entry of the original decree or until Patek’s petition was filed — almost five years later. Notwithstanding these circumstances, Patek now claims that the findings of the decree are final and that his possession of the bonds precludes respondents from raising any equitable or legal defense to the entry of a judgment against them, because to raise such defense would set aside or violate the terms of the original decree. We do not concur in that conclusion for the following reasons : the foreclosure decree provided that the premises should be sold and after the filing and confirmation of the master’s report of sale, in case any deficiency should be shown in the amounts due complainant, the court retained jurisdiction for the purpose of entering a deficiency decree, if any, against respondents, whom the court found personally liable for the deficiency. Obviously, the amount of the deficiency could not be ascertained until after the sale was held and a period of substantially four and one-half years intervened between the entry of the foreclosure decree and the master’s sale; therefore, the decree could not be final as to the question of the deficiency until the amount thereof was judicially determined July 9, 1937. The law is well-settled in this State that under the circumstances of the record here presented the findings of the foreclosure decree with reference to respondents were not final until the court had judicially determined the amount of their personal liability, and this did not occur and could not have occurred until after the sale was made and the master had reported the amount of the deficiency. (Cotes v. Bennett, 183 Ill. 82, 87; Springer v. Law, 185 Ill. 542, 545; Eggleston v. Morrison, 185 Ill. 577, 578; Hartman v. Pistorius, 248 Ill. 568, 571; Lewis v. Matteson, 257 Ill. App. 1.) And in fixing the amount of the deficiency decree the court had jurisdiction to determine any intervening fact which would make it inequitable to enter a deficiency against appellees or which would render the entry of a deficiency decree inequitable under any showing made to the court.

This leads to a consideration of the second question involved in Patek’s appeal, namely, whether Patek was the owner of the bonds claimed and equitably entitled to the relief sought by his petition. In this connection, Patek argues that under the findings of the decree the bonds which he claims were adjudicated in the original foreclosure, and that the findings of the court cannot be questioned as between him and respondents. This argument does not take into account Patek’s relationship to the proceedings. He was not a party to the foreclosure decree and he is therefore not in a position to claim any benefit from its findings. Under the doctrine of res adjudicata, a point once adjudicated by a court of competent jurisdiction may be relied upon as conclusive upon the same matter as between the parties or their privies in any subsequent suit, but it has been generally held that the doctrine has no application against or in favor of anyone who was not a party or privy, and that the latter class of persons cannot claim the benefit of such an adjudication. (People ex rel. Chicago Bar Ass’n v. Amos, 246 Ill. 299, 303, and cases cited therein; Culver v. Lincoln Sav. S Bldg. Ass’n, 271 Ill. App. 91, 99.) By his petition Patek was seeking affirmative relief in the nature of a finding by the court that he was the owner and holder of bonds described therein. The original decree found that all the bonds were outstanding and that Baim was liable upon them, and Patek argues that this constituted an adjudication which could not later be questioned by respondents. Those findings, however, would not entitle Patek to the relief sought unless he could show by competent evidence that he was the owner of the bonds, and when Patek filed Ms petition, claiming such ownership, appellees were at liberty to interpose any available defense, legal or equitable, to the entry of a judgment against them in favor of Patek.

With reference to Patek’s claim for a judgment against respondents, the master, in a voluminous report, reviewing all the evidence and circumstances adduced upon the hearings, found the existence of an agreement under which the bonds claimed by Patek should remain unissued bonds, for which there should be no liability on the part of Baim. Evidence introduced before the master discloses that Patek is a practicing attorney at the Chicago Bar; that he and Rausch, one of the respondents, had been intimate friends for a long period of time; that some time prior to Patek’s alleged purchase of the bonds in question he heard, through a Mr. Hogan of the Maryland Casualty Company, that Baim had offered to pay Hogan $700 if he would put Rausch in jail; that Rausch was arrested and Patek appeared in court and went on his bond; that it was about this time that Patek learned of the foreclosure proceeding in question, and that a deficiency decree had been entered and he thereupon determined that a purchase of the missing bonds would constitute a good investment for himself. He therefore proceeded to locate the bonds and after considerable difficulty and the lapse of several months he acquired them by purchase from Hyman A. Pierce for $675, on account of which he paid $525, remaining indebted to Pierce for the balance of $150. The master found that Patek’s title to the bonds was defective, because Pierce had no valid title thereto. ■ Pierce obtained the bonds from the receiver of the Humboldt State Bank. The claim is made by Patek that Pierce was the purchaser of all the assets of the Chilton C. Collins trust, and that he acquired title to the bonds in controversy from Collins, as trustee, The record discloses that a receiver had been appointed for the Chilton C. Collins trust, in case No. B-263,714, circuit court of Cook county, entitled Ballinger v. Collins, and a decree was entered in that case finding and setting forth the various assets of the Chilton C. Collins trust. A full and complete inventory of these assets is listed in the decree, which was received in evidence in this proceeding. An examination of this decree and inventory shows that the bonds in controversy were not listed in any way as a part or portion of the assets of the Chilton C. Collins trust. July 14, 1934, an order was entered in Ballinger v. Collins, which was also introduced as an exhibit in this proceeding, and the wording of that order discloses that the cause came on to be heard upon the bids for the sale of the assets described in the decree in that case; the order further recites that the bid made by Hyman A. Pierce of $2,500 was the highest and best bid for the assets described in the decree and that Pierce’s bid was accordingly accepted; and it provides that upon payment of the balance of $2,000 on his bid Pierce be vested with all right, title and interest of the successor trustee in and to “all of the property described in the decree.” Afterward, July 19, 1934, a further order was entered in Ballinger v. Collins, a certified copy of which was received as an exhibit in this proceeding, which approved Pierce’s bid and again confirmed the sale. It is apparent from the order that Pierce purchased only the assets that were described in the decree and that the bonds here in controversy were not included as part of the assets sold to Pierce. When the Humboldt State Bank was placed in receivership these bonds were evidently found in the vaults, where they were probably placed pursuant to the agreement between Baim and Collins that they should remain unissued. They were never listed as an asset of the Humboldt State Bank and were apparently always treated on its records as unissued bonds and not as a liability of defendant Baim. Moreover, the bonds Patek purchased from Pierce were not in Pierce’s possession but were in the possession of one Schelling, who was in the employ of the receiver, and were delivered to Patek merely upon Pierce’s mistaken assurance to Schelling that they were part of the assets of the Chilton C. Collins trust, and that he had purchased them under the order of court hereinbefore referred to. Manifestly, this was not correct, because Pierce never did purchase these bonds from the trust as is indicated by the fact that the assets which he bought were specifically listed in an inventory set forth in the decree, which does not include the bonds claimed. Pierce furnished no consideration for these bonds, and the circumstances indicate that Schelling delivered them to Patek under the mistaken belief that they were included in the order of sale to Pierce and as a result of Pierce’s own error in believing that he had purchased them from the Collins trust. All these matters were voluminously presented to the master in a record of over a thousand pages and he made specific findings thereon setting forth the reasons for his conclusions. After a careful examination of the record and the master’s report, we are convinced that his findings are abundantly supported by the evidence and that Patek failed to maintain the allegations of his petition.

In addition to the contention that there was no liability on Baim for bonds claimed by Patek and that Patek’s title to these securities was defective, respondents argue also that if Patek became the owner of the bonds he became the holder thereof after maturity and took them with notice of the defect in title; that Patek was guilty of bad faith with reference to the purchase of the bonds because his relationship to Baim and Bausch, as their attorney, would in the exercise of good faith preclude him from purchasing the bonds for the purpose of obtaining a judgment against them; but in view of our conclusion as to the matters hereinbefore discussed and the length of this opinion we deem it unnecessary to discuss these questions.

In addition to the jurisdictional question and the discussion of the evidence relating to the ownership of the bonds, Patek advances the legal proposition that possession'of the bonds is prima facie evidence of ownership and he cites cases to support his contention. While this general principle of law may be conceded, it is also well settled that the possession of bonds is merely prima facie evidence of ownership and the presumption thus established by law may be rebutted by evidence. We are satisfied that the evidence adduced by respondents sufficiently overcame any legal presumption operating in Patek’s favor.

Lillian Arndt’s appeal is prosecuted from an order of the superior court entered March 23, 1938, in the same proceeding, denying her a change of venue, removing the successor trustee and also from an order of May 5,1938, finding that she was not the owner and holder of certain bonds which had been assigned to her by Helen S. Asher, and dismissing Lillian Arndt’s petition for want of equity and vacating the deficiency decree entered on July 9, 1938, in the foreclosure proceeding.

The circumstances applicable to this appeal show that Lillian Arndt appeared in these proceedings for the first time March 15,1938, when she filed her petition praying for the appointment of a successor trustee. This motion was made before Judge Fardy, who was hearing chancery motions during the temporary absence of Judge Stanton, both of the superior court. Judge Fardy entered certain orders on Arndt’s petition, and later on March 23,1938, when Judge Stanton resumed hearing his motions, Baim filed a petition seeking to vacate the orders entered by Judge Fardy March 15. It was on this occasion that Lillian Arndt filed her petition for a change of venue, which was consented to and concurred in by Patek, the other petitioner, whose petition was still pending before the court. Arndt’s petition for change of venue was denied and the petition she had filed March 15, 1938, was set for hearing on its merits before Judge Stanton for April 15, 1938. On the latter date her attorney filed a motion asking that the order denying the change of venue be vacated, that a change of venue be allowed, and in the alternative that the original order entered denying the change of venue be amended by striking out therefrom the incorporation of certain findings and the removal of the successor trustee which had been ordered by Judge Fardy. This last motion was continued to May 4,1938, when Arndt’s counsel offered in support of her petition a stenographic report of the proceedings had on the hearing on the motion for change of venue. Judge Stanton then denied the several motions of Lillian Arndt and she assigns this as ground for • reversal. In preparing the record in this case before the present counsel assumed charge of the litigation some one inserted the penciled word, “before,” on page 316 of the transcript, so that it would appear that the petition for change of venue was presented first. Respondents ’ counsel then moved to have this corrected, and an order was entered here during the pendency of this appeal so that it now appears that the hearing of the Baim petition was begun before the Arndt petition for change of venue was filed. Judge Stanton had on numerous occasions said that he would not appoint a successor trustee until the report of the master was filed with reference to the Arndt petition, but this was evidently unknown to Judge Fardy when the order of removal was entered. That reference to the master was then pending, and the record shows that after the change of venue was denied Lillian Arndt’s counsel proceeded to a hearing before Judge Stanton on the question of ownership of the bonds claimed by her, and since she made no objection to the hearing and in fact called witnesses in support of her claim she waived any right that she may have had to the change of venue. (Noyes v. Kern, 94 Ill. 521.)

Lillian Arndt makes the same contention as did Patek with reference to the jurisdiction of the court to enter an order at a subsequent term, vacating and setting aside the deficiency decree and ordering that no deficiency should be entered. This question has been fully discussed and the same conclusions we reached as to Patek are applicable to Lillian Arndt.

The only other ground urged for reversal is that the findings in the decree entered May 5, 1938, were not supported by any evidence adduced at the hearing. This has reference to that portion of the decree which found that neither Lillian Arndt nor Helen S. Asher, from whom Arndt claimed her assignment, were the owners and holders and never had any right, title or interest in bonds 77 to 88 and 133 and 134, signed by respondents. The sole question before the master and court was whether Lillian Arndt was the owner of the bonds or entitled to the proceeds thereof. The master recommended and the court found that she did not own these bonds. Whatever right Arndt claimed arose from the purported assignment from Helen S. Asher, who received the bonds by assignment from Logan L. Mullins, receiver of the Humboldt Bond & Mortgage Company, and, of course, if Asher had no title to the bonds Arndt could not acquire any by assignment. The evidence relating to these bonds may be summarized as follows: bonds 133 and 134, claimed by Arndt as her property, were found to have been deposited with the Chicago Title & Trust Company. Meyer Fink, one of the witnesses, so testified. Bonds 77 to 88 and 133 and 134 were not listed as assets of the Humboldt Bond & Mortgage Company or its receiver. This appears from the testimony of George Sleigh called as a witness on behalf of Arndt. Sleigh testified that none of these bonds was ever in the possession of Humboldt Bond & Mortgage Company, and that although he made an investigation he did not find them listed among its assets. Although Humboldt Bond & Mortgage Company owned some of the bonds of this issue, those bonds were deposited with the committee in accordance with the court’s instructions to deposit all first mortgage bonds held on behalf of the receiver with the committee. It further appears that when Mullins was appointed receiver of Humboldt Bond & Mortgage Company he prepared an inventory of its assets, which did not include any of these bonds. Inasmuch as Arndt’s claim of ownership originated in the assignment from Mullins to Asher, it is obvious that unless Mullins had some claim of title to these bonds his assignment to Helen S. Asher and her subsequent assignment to Arndt would not vest any title in Arndt upon which she could successfully maintain her petition. Arndt’s claim was predicated upon her ownership of the bonds, and the burden of proving that she was the owner rested on her. The court was evidently of the opinion that she failed to introduce any convincing evidence of her ownership and based upon the testimony of the various witnesses, who adduced evidence to the contrary, we think the court properly dismissed Arndt’s petition on the ground that she had no interest in the subject matter, not being the owner or holder of the bonds, and denied her any relief accordingly.

Counsel for the respective parties argue the question of fraud and want of consideration in connection with Arndt’s right to maintain her petition, but since the court held, and we think properly so, that Arndt had no interest in the subject matter because she was not the owner of the bonds, these questions are not controlling.

Several motions made during the pendency of these appeals, including the motion of respondents to dismiss the appeals, were reserved to hearing. All these motions are herewith denied.

After a careful review of the evidence, we are of the opinion that the court properly dismissed both the Patek and the Arndt petitions, and the orders of the court relating to the appeals of both these petitioners are therefore affirmed.

Orders affirmed.

Scahlah, P. J., and Johh J. Sullivah, J., concur.


source: Caselaw Access Project

author: Mr. Justice John J. Sullivan

license: Public Domain

text:
    Personal Loan & Savings Bank, Appellee, v. Eugene Schuett et al., Defendants. Appeal of Advance Cleaners & Dyers, Inc., Appellant.
    Gen. No. 40,289.
    Opinion filed March 28, 1939.
    William Vihoh, of Chicago, for appellant.

      Reginald C. Darlet, of Chicago, for appellee; Oscar Gr. Wahlgkbn, of Chicago, of counsel.
   Mr. Justice John J. Sullivan

delivered the opinion of the court.

This appeal seeks to reverse an order entered by the municipal court of Chicago, which denied the motion of the Advance Cleaners & Dyers, Inc., garnishee defendant, to vacate a garnishment judgment rendered against it by default.

On April 27, 1937, Mrs. Eleanor Sehuett and four other persons executed their promissory note to the Personal Loan & Savings Bank, beneficial plaintiff herein, for $435. The makers of this note defaulted in the payment of same. October 7, 1937, the beneficial plaintiff confessed judgment thereon for $424.35 against Mrs. Sehuett and her cosigners of said note. October 22, 1937, a garnishment proceeding predicated on said judgment was instituted against the Advance Cleaners & Dyers, Inc., as garnishee. Theretofore, October 17, 1937, two garnishment demands, one directed to the Advance Cleaners & Dyers, Inc., as the employer, and the other to Mrs. Eleanor Sehuett, as the employee, were caused to be served by Roy Peterson, plaintiff’s agent, at the store owned by the garnishee upon Mrs. Sehuett, who was the sole employee in said store and who also was, as heretofore shown, one of the defendants and a judgment debtor in the original action. Likewise the garnishment summons directed to the Advance Cleaners & Dyers, Inc., was served by the bailiff of the municipal court upon Mrs. Sehuett as the agent of the garnishee. She did not deliver the garnishment demand or the summons to any other employee or official of the garnishee nor inform any other employee or official of the garnishee of the service thereof, and said garnishee consequently failed to appear or answer on the return date specified in said summons. The court then entered a conditional judgment against garnishee by default. Pursuant to the conditional judgment a writ of scire facias was issued against garnishee to show cause why the conditional judgment should not be made final. A bailiff of the municipal court served the writ of scire facias upon Mrs. Sehuett as the agent of the garnishee and she failed to give such writ of scire facias to any other employee or official of the garnishee nor did she inform any other employee or official of the service thereof. The garnishee, not having received the writ of scire facias and having no knowledge of the service thereof, failed to appear November 15, 1937, the return day of said writ, and the court entered a final judgment by default against it for $424.35.

March 16, 1938, about four months after the final default judgment had been entered against it, the garnishee filed a verified petition to vacate said judgment, which petition after averring the facts heretofore set forth alleged inter alia that it had no notice or knowledge of the entry of the judgment against it until about March 5, 1938; that on that date an unknown individual called at Bellwood, Illinois, at the plant where garnishee sends its work and where the president of garnishee is employed, and informed said president of the entry of the judgment and requested payment thereof; and that “at no time did Mrs. Eleanor Sehuett have authority to act for your petitioner to receive service of summons of any sort. In fact, at the time of the service of both of these summonses, ill-feeling existed between your petitioner and Mrs. Eleanor Sehuett. Tour petitioner had trouble with her. She was misplacing garments and failed to account accurately for funds entrusted to her possession at the store at 5527 West Chicago avenue. This occurred on or about November 6, 1937. Mrs. Sehuett wilfully and intentionally failed to notify your petitioner of the service of said garnishment summons because of the resentment she had against your petitioner. At no time, from October 20,1937, to the date hereof was there any funds due from your petitioner to Mrs. Eleanor Sehuett, nor did your petitioner pay her any funds whatsoever from October 20,1937, to the date hereof. At no time from October 20, 1937, to the date hereof did your petitioner have any property in its possession belonging to or owned by Mrs. Eleanor Sehuett. That on November 6, 1937, said defendant, Mrs. Eleanor Sehuett was discharged from petitioner’s employ. ’ ’

Plaintiff filed an answer to garnishee’s petition, which alleged in substance that the garnishment summons and the scire facias were properly served upon the garnishee; that proper returns were made by the bailiff of the municipal court; that the garnishee did not appear or answer either on the return date of the garnishment summons or of the scire facias; that the garnishee was properly defaulted; that there is no error in the record “in the nature of error coram nobis”; that the judgment having been entered more than 30 days before the filing of the petition to vacate, the court was without jurisdiction to vacate, alter or amend its judgment; and that “the petition being without equity and not exhibiting any grounds for relief and the Court being without jurisdiction” said petition should be stricken from the files.

During the course of the hearing upon garnishee’s petition and plaintiff’s answer thereto all material evidence offered by the garnishee in support of the allegations of its petition was excluded, apparently on the theory that the bailiff’s return of service could not be contradicted and the motion to vacate the judgment was denied.

Of the grounds urged for reversal it is only necessary to consider garnishee’s contention as stated in its brief that “service of garnishment notice and process on Mrs. Eleanor Sehuett as the agent of the garnishee was void and the Court secured no jurisdiction over the garnishee because Mrs. Sehuett was a judgment defendant in the same case who suppressed the fact of service and she was unfriendly, antagonistic and adverse to appellant’s interest.” It was not the purpose of the petition to vacate to question or discredit the several returns of service of process by the bailiff of the municipal court but to show the existence of facts rendering such service void. The service of process on the garnishee corporation upon its agent Mrs. Schuett, was in compliance with the letter of the statute authorizing such service (ch. 110, par. 141, sec. 17, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 104.017]), but in violation of the spirit of same. She was one of the defendants and judgment debtors in the original action, as well as a nominal plaintiff in the garnishment proceeding. Furthermore, the petition to vacate alleged and it was not denied that Mrs. Sehuett was unfriendly and antagonistic to the garnishee, and its president, who was the only official of the company actively engaged in the management of its stores.

Service of process against a corporation on an officer or agent whose relation to the claim in suit is such as to make it to his or her interest to suppress the fact of service, is unauthorized, though the person served is within the terms of the statute authorizing the service. (People ex rel. Lafferty v. Feicke, 252 Ill. 414; Atwood v. Sault St. Marie Light, Heat & Power Co., 148 Mich. 224.)

In the Feicke case, supra, where the service of a petition and written notice was made upon the clerk of a board of school directors, as required by statute, but the clerk was also one of the petitioners in the cause, after citing and discussing several analogous cases, the court said at p. 420:

“The rule to be deduced from these cases is, that where one occupies a fiduciary or representative relation to a person or subject matter to be affected by an action or proceeding, and such person has some personal interest in such proceeding, either as a party or otherwise, antagonistic to the interest of others represented by him, service of jurisdictional process on such representative will confer no jurisdiction, even though the statute expressly provides for service on one in such relation. Under the law the service upon Feicke is void, not because it was served by him, but because it was served upon him, as clerk of the board of directors of district No. II, when he was a petitioner and had personal interests antagonistic to his duty as director and clerk of the board.” (See also St. Louis & Sandoval Coal & Mining Co. v. Edwards, 103 Ill. 472; Hemmer v. Wolfer, 124 Ill. 435; Heppe v. Szczepanski, 209 Ill. 88.)

In Upton Mfg. Co. v. Stewart Bros., 61 Iowa 209, where the facts as to the service of process in a garnishment proceeding were identical with the facts here, the court said at ppt 210, 211:

“In December, 1880, Stewart Bros, caused an execution to be issued on their judgment against Book, and the sheriff returned thereon that he served ‘the same by summoning the Upton Manufacturing Company as garnishee of J. P. Book, by reading the garnishment notice thereto attached to J. P. Book, agent for said garnishee, doing business for it in Shelby county.’ The garnishment notice required the g*arnishee to appear and answer on the first day of the next term of the circuit court. The manufacturing company did not appear at the next term, and it was adjudged in default, and a judgment was entered against the company for the full amount of the original judgment against Book, and leave was given to show cause by the first day of the next term why execution should not issue. A notice to show cause, directed to the Upton Manufacturing Company, was served upon Book, as agent, in the same manner as the service of the garnishment notice. No appearance was made by the company, and, at the October term, 1881, the conditional judgment was affirmed and made absolute.

‘ ‘ The company, or rather the general officers thereof, had no actual notice of any of these proceedings until after the final judgment was rendered, and no notice of any kind, unless it be held that the notices served upon Book were sufficient to give the court jurisdiction of the company; and it was at no time indebted to Book in any sum, but, on the contrary, he was indebted to the company from the time that he made the first sale of machinery, up to the time of the trial of this case in the court below.

“If the circuit court had no jurisdiction of the company by virtue of the service of the notices upon Book, the judgment is void, and the decree of the circuit court vacating it is correct. We will proceed to an examination of this question. Counsel for appellant claim that jurisdiction was acquired under the provisions of section 2613 of the Code, which is in these words. ‘When a corporation, company or individual has for the transaction of any business an office or agency in any county other than that in which the principal resides, service may be made upon any agent or clerk employed in such office or agency, in all actions growing out of or connected with the business of that office or agency.’

“Under this provision of the law, if Book had sold a machine with a warranty, in an action for the breach of the warranty, service upon him would have been service upon the principal, because the action would have grown out of his agency. So with any other cause of action connected with the sale of machines by him. But the collection of a judgment from Book by garnishment of those who are supposed to be his debtors, has no connection with his said agency. Appellee, under the contract with Book, was bound to take notice, as his principal, of his acts within the scope of his agency, and the statute binds the principal by service upon the agent in all actions growing out of the agency. It is argued that, because the claim made by the garnishment was that the company was indebted to Book in the matter of the agency, the action was connected with the agency. We think this is not within the meaning of the statute. It requires the principal to respond to service made upon the agent in matters connected with the agency. To require the principal to respond to service upon the agent in a proceeding for the collection of a debt from the agent in no manner connected with the agency, is quite another matter. Such an obligation, we feel quite sure, is neither within the letter nor spirit of the statute.”

We think that the rule pronounced in the foregoing authorities is peculiarly applicable to the facts showing the nature of the service of process upon the garnishee in this cause. Since the service of the garnishment summons and the writ of scire facias against the corporate garnishee on its employee, Mrs. Schuett, under the facts heretofore set forth, was insufficient to confer upon the court jurisdiction of said garnishee, the judgments entered pursuant to such purported service are void and it is elementary that void judgments may be vacated at any time.

It would be unconscionable to permit the judgment against the garnishee to stand, compelling it to pay the debt of another without first having been allowed its day in court.

Other points have been urged and considered, but in the view we take of this case we deem further discussion unnecessary.

For the reasons stated herein the order of the municipal court denying garnishee’s motion to vacate the conditional judgment entered against it upon the return of the garnishment summons and the final judgment entered against it upon the return of the writ of scire facias is reversed and the cause remanded with directions to allow garnishee’s motion to vacate both the conditional and final default judgments rendered against it and that such further proceedings be had as are not inconsistent with the views expressed herein.

Judgment reversed and cause remanded with directions.

Scanlan, P. J., and Friend, J., concur.


text:
    Chicago Title & Trust Company, Appellee, v. Theodore R. Herlin et al., Appellants. J. L. Pyle et al., Appellees.
    Gen No. 40,392.

      Opinion filed March 28, 1939.
    Tags Joranson, of Chicago, for appellants.
    Schnackenberg, Hansen & Towle, of Chicago, for certain appellee.
   Mr. Justice John J. Sullivan

delivered the opinion of the court.

This appeal seeks to reverse a decree of foreclosure entered July 14, 1938, upon the report of a master in chancery.

The complaint to foreclose, filed March 25, 1938, by the Chicago Title & Trust Company, as trustee, alleged an original indebtedness of $39,000 with interest, evidenced by bonds and interest coupons attached thereto; the conveyance of the real estate devolved to plaintiff by the original mortgagors, August T, .Herlin and Sophie K. Herlin, his wife, to secure the payment of said indebtedness and interest; an extension agreement entered into December 15, 1933, by Theodore R. Herlin, the then owner of record of the property, and Edna M. Herlin, his wife, to pay $35,000, the reduced amount of the indebtedness, with interest, December 15, 1936; default in the payment of the principal of the bonds, amounting to $35,000, and interest and taxes; and the insufficiency of the security, which consists of the aforesaid real estate improved with an 8-apartment building, the apartments in which are occupied by Theodore R. Herlin and others holding as tenants under him. The complaint named as defendants Theodore R. Herlin, the record owner of the property, his wife, Edna M. Herlin, Sophie K. Herlin, one of the original mortgagors, J. L. Pyle, Rose L. Pyle, his wife, Charles Ringer, Charles Ringer Company, hereinafter for convenience referred to as the Ringer Company, and “Unknown Owners.” The tenants in possession were not named as defendants.' The complaint concluded with the usual prayer for relief, including a request for the appointment of a receiver and that plaintiff might have a deficiency decree for any balance due after sale.

Theodore R. Herlin, Edna M. Herlin and Sophie K. Herlin appeared, but all other defendants were defaulted and the complaint ordered taken as confessed as against them.

On June 18, 1938, all three Herlins filed an answer, which consisted of a general denial of the allegations of plaintiff’s complaint and that plaintiff was entitled to the relief prayed for in the complaint.

Thereafter, on July 5, 1938, Theodore R. Herlin and Edna M. Herlin filed an amended answer, the pertinent portions of which are:

‘ ‘ That they allege that since March 1,1933, they have been and are now the owners of record in fee simple of said real estate, but that they have held and do now hold title to such property in trust as to one-half thereof for Charles Ringer and as to the other undivided one-half thereof as to themselves.

‘ ‘ That they say that in December, 1933, they agreed in writing with the holders of the bonds secured by the mortgage herein sought to be foreclosed to extend the maturity of the principal of the said bonds to December 15, 1936, and that the income from the real estate conveyed by said mortgage was to be paid to Charles Ringer Company, as the agent for said bondholders and the owners of said property; that from and after January 31, 1937, up to the present time Charles Ringer Company has collected the rents from said real estate, and although these defendants have often requested Charles Ringer Company to account for said rentals to them, the said Charles Ringer Company has failed and refused to account to them, and still continues so to do; that these defendants are informed and believe and upon such information and belief state that Charles Ringer Company has in its possession net rentals in excess of Fifteen Hundred ($1500) Dollars from said real estate, collected during said period of time, which should be, but has not been, applied in reduction of the general taxes levied and assessed against the said real estate and of the indebtedness secured by the said mortgage. ’ ’

The decree approved the master’s report and as to the matters pertinent to this controversy found that by the extension agreement executed by Theodore R. Herlin and Edna M. Herlin, his wife, the principal and interest were payable at the office of Ringer Company and that the trust deed remained unchanged except as qualified by said extension agreement; that plaintiff, as trustee, for its own benefit for expenses incurred has a first lien against the real estate in question and the income thereof for $2,451.50, and that “plaintiff for the pro rata benefit of the bondholders for principal and interest has a valid lien against said real estate and income thereof for $38,817.92, with interest thereon, subject only to the aforesaid lien for $2,451.50”; that the aforesaid extension agreement provided that Ringer Company collect the rents, issues and profits from said real estate and apply same in accordance with the terms, covenants and provisions therein set forth; that a copy of the extension agreement was attached to each of the bonds received in evidence; that Theodore R. Herlin is now the record owner of said premises, having acquired same by quitclaim deed from August T. Herlin and Sophie K. Herlin, his wife, filed for record March 3, 1933; that Theodore R. Herlin testified that “said Charles Ringer Company had in its possession on or about June 23, 1938, the sum of $1,500, being the proceeds from the rents, issues and profits collected from said premises and that upon cross-examination of said witness the said Herlin testified that the Charles Ringer Company collected approximately $400 a month from the various tenants occupying the apartments in said premises, but that he did not receive any figures from Charles Ringer Company whatsoever since January 31, 1937, with respect to his statement that the said Charles Ringer Company did have in its possession $1,500 from the rents, issues and profits of such premises”; that “said trust deed is a lien upon the rents, issues and profits of said premises and that any defense with respect to the moneys in possession of Charles Ringer Company as an offset against the indebtedness upon said trust deed is a collateral attack upon the lien of said trust deed, and that no issue has been raised or joined upon in this cause upon which affirmative relief can be granted to the defendant, Theodore R. Herlin”; and that Theodore R. Herlin, Edna M. Herlin and Sophie K. Herlin are personally liable for the trust deed indebtedness.

Defendants first contend that under the provisions of the extension agreement executed between Theodore R. Herlin, the owner of the equity, and his wife, Edna M. Herlin, and the bondholders, inasmuch as Ringer Company “was to collect the rents and apply same in accordance with the terms of the extension agreement, i. e., on principal and interest,” the income from the property to the extent of $1,500 collected and held by said Ringer Company, as alleged and testified to by Theodore R. Herlin, constituted payment pro tanto on the trust deed indebtedness; and that the allegations of the equity owners in their amended answer as to such collection and withholding of said rents by the Ringer Company adequately presented a defense of partial payment.

In answer to this contention plaintiff states in its brief that “in this mortgage foreclosure suit, the defendants, Theodore R. Herlin and Edna M. Herlin, cannot, without filing a counterclaim, litigate their dispute with the. codefendant, Charles Ringer Company, in regard to the latter’s management of, or collection or accounting of rentals from, the mortgaged premises, which rentals, the Berlins ’ amended answer affirmatively shows, have not been paid in reduction of the mortgage indebtedness.”

The first difficulty with defendants’ instant contention is that the complete extension agreement has not been embodied in the record and there is nothing before us which shows that Ringer Company received the income from the premises as the agent of the bondholders as well as the agent of the Herlins, or that Ringer Company as the agent of the bondholders was obligated under the terms of the extension agreement to apply the rentals collected by it to payment of the trust deed indebtedness. It may well have been that company’s duty under said agreement to apply the income in question first to the payment of taxes as alleged in defendants’ amended answer. The mere fact that the bonds were payable at the office of Ringer Company did not in itself constitute that company the agent of the bondholders. (2 C. J. 606; Adams v. Hackensack Improvement Commission, 44 N. J. L. 638.) In any event it is not only admitted but it is alleged in defendants’ amended answer that Ringer Company did not turn the aforesaid $1,500 claimed to have been collected but not accounted for by it over to the trustee for the benefit of the bondholders, and that being so the owners of the equity are not entitled to credit for same on their indebtedness to said bondholders.

Defendants’ contention that their amended answer presented a defense of partial payment is not borne out by an examination of said answer, wherein it affirmatively appears that the income alleged to have been collected by Ringer Company “had not been applied in reduction of the indebtedness secured by said trust deed.” It will be noted from the averments of said amended answer that defendants, Theodore R. Heriin and Edna M. Heriin, really seek thereby to litigate their controversy with Ringer Company as to the rents alleged to have been collected by the latter, claiming a right to an accounting from said company as to same. The amended answer contains the allegation that the defendants, Theodore R. Heriin and Edna M. Heriin, “have held and do now hold title to such property in trust as to one-half thereof for Charles Ringer and as to the other undivided one-half thereof as to themselves” and the decree entered in this cause finds that “proceedings were instituted in the Superior court of Cook County, Illinois, in Case Number 36 S 13812, on September 17, A. D. 1936, entitled: ‘Charles Ringer v. August T. Heriin, et al., for an accounting and other relief, by reason of the management of said property by Charles Ringer Company; that said cause is still pending and undisposed of.” It thus appears that there was a pre-existing and continuing controversy between the Berlins, Charles Ringer and Ringer Company concerning the management of the property and the latter’s accounting for the rents collected and that defendants’ amended answer rather than presenting a defense of partial payment of the trust deed indebtedness had to do entirely with their dispute with the Ringer Company.

It is the established rule that a defendant who desires affirmative relief against a codefendant on a matter germane to the issue presented by the complaint, is required to file a counterclaim and cannot secure such relief on an answer filed to plaintiff’s complaint. Any other rule would be fraught with great danger of injustice. In the case at bar both Charles Ringer and Ringer Company, having been served with summons, permitted themselves to be defaulted as to plaintiff’s complaint, which sought only the foreclosure of the trust deed and made no claim as to rents alleged to have been collected and wrongfully withheld by Ringer Company. Both Charles Ringer and Ringer Company had the right to assume that the subject matter of the proceeding in which they had been summoned as defendants would not extend beyond the scope of the complaint, and having no defense to the foreclosure they could safely ignore the suit. If the Herlins without advising Charles Ringer and Ringer Company by way of a counterclaim could have litigated on their answer the disposition of the rentals alleged to have been collected by Ringer Company, then the court without notice or warning would have had to pass upon the rights of Charles Ringer and Ringer Company in their absence. Defendants having failed to file a counterclaim asserting their claim for relief against Ringer Company are precluded from an adjudication in this cause of any claim they might have against said company for an accounting of the rents charged to have been collected and not properly applied.

In Erlinger v. Boul, 7 Ill. App. 40, it appeared that Erlinger and his wife executed to Boul a mortgage to secure an indebtedness and that thereafter, at a sheriff’s sale, the mortgaged property, except 12 acres thereof which was set off to Erlinger as a homestead, was sold to Ambry, who secured a sheriff’s deed and later died. The mortgage was then foreclosed by Boul, who made the legatees and administratrix of Ambry, as well as the Erlingers, defendants. The bill was taken as confessed against Erlinger for want of an answer. The Ambrys, by answer, asked that in case of a sale under the mortgage the 12 acres set off as a homestead to Erlinger be sold first. It was so decreed and Erlinger sued out a writ of error. The court said at pp. 42-44: “Assuming that upon the facts alleged in the answer of the Ambrys, it was proper to make this order, we are of opinion that a cross-bill was necessary. There is no allegation in the bill upon which the decree can rest, and the facts set up by Ambry’s heirs should have been made the subject of a cross-bill, so that they might have been contested by Erlinger if he had desired, and in this way a new controversy which was not between the complainants and defendants, but obviously between the defendants, could have been adjusted.

“When a decree on complainant’s bill will not determine the litigation, a cross-bill is necessary. This may arise when cross-relief is required by defendants, or from the existence of litigation between the defendants. Adams’ Equity, 40-23; Story’s Eq. PI. 392.

“And generally, whenever it is necessary to bring all the equities of all the parties before the court, so that complete justice may be done the defendants, or a part of them, by granting affirmative relief as well as by granting the complainant the relief sought by his bill, it is necessary to file a cross-bill.

i C

“The relief sought here is on behalf of one defendant, at the expense of another, and is upon a state of facts not alleged in the bill. Suppose Erlinger had learned the contents of this answer before the rendition of the final decree, and had desired to test the question of law arising thereon, or had desired to controvert the facts alleged, in what appropriate way could he have done so?

“He had not answered the original bill, having no defense thereto, and not objecting to the relief therein prayed, and his default, and a decree pro confesso had passed against him. The complainant may have been indifferent, and not inclined to take issue upon the answer. So that, by the practice here adopted, a decree materially affecting the rights of Erlinger was entered in a proceeding to which he was practically not a party, and. upon pleadings to which he was not asked to respond, and which were determined wholly between other persons.

“It would seem that the bare statement of the case would sufficiently show the importance and necessity of a cross-bill to which Erlinger might answer or demur, making such issues of law or fact, as he might deem proper for his protection.”

In passing upon a similar question in Houck v. Herrick, 187 Ill. App. 579, the court said at pp. 580, 581:

“The answer is that equities arising between co-defendants can only be adjusted on cross-bill filed by the party seeking such aid of the court. This has been repeatedly held from the case of Ballance v. Underhill, 4 Ill. (3 Scam.) 453, to Thomas v. Thomas, 250 Ill. 354, and it is not a mere technical rule of pleading. If one defendant seeks relief as against another defendant because of facts and conditions alleged to exist, that other defendant must have an opportunity to answer and be heard in the matter, which is not afforded by setting up in an answer grounds for such relief. Appellant filed no cross-bill and therefore cannot complain that equities between himself and Lizzie Grove Ryan were left unadjusted. We express no opinion that the facts disclosed by his answer, if properly pleaded would entitle him to relief. It was not the duty of the chancellor to consider or determine that question, and he did not err in not doing so. ’ ’

The clear purport of the amended answer filed by Theodore R. Herlin and Edna M. Herlin was that Ringer Company should have made a payment on the mortgage indebtedness from rentals alleged to have been collected by it and not required for the payment of general taxes and not that a payment had been made on said indebtedness out of such rentals. The amended answer presented no defense to the complaint to foreclose.

It is next urged that the decree is erroneous in holding the surviving mortgagor, Sophie K. Herlin, personally liable for the mortgage indebtedness, since the mortgagors had conveyed the property in question to Theodore R. Herlin prior to the execution of the extension agreement and said agreement of Theodore R. Herlin and his wife with the bondholders for the assumption of payment and the extension of the time of payment of the mortgage indebtedness operated to discharge the mortgagor from personal liability. There are several reasons why this contention is without merit, but it is sufficient to say that the bonds evidencing the indebtedness, which were executed by Sophie K. Herlin, the surviving mortgagor, contained the following provision:

“The original liability of the undersigned hereon shall, under all circumstances whatsoever, even though the time of payment of any or all of said bonds shall be extended without the assent of the undersigned, continue in its original force until the principal amount hereof and all interest thereon are fully paid. ’ ’

Defendants’ final contention is that tenants in possession are necessary parties to a foreclosure suit and that plaintiff’s failure to make such tenants parties to this proceeding rendered the decree erroneous. Plaintiff’s position in this regard is that “where an owner of real estate, joined as a defendant in a suit to foreclose a trust deed given to secure an indebtedness, in no way objects in the lower court to the non-joinder as defendants of tenants holding under him,, and no reason appears why an effective decree cannot be made, the non-joinder cannot be successfully urged for the first time by the owner, in the reviewing court, on appeal from a decree of foreclosure. ’ ’

While it is the general rule that tenants in possession are necessary parties to an action to foreclose a trust deed, where the question of the nonjoinder as defendants of tenants in possession is raised for the first time on appeal and where defendants say in their brief that ‘ ‘ the eight apartments on this real estate are occupied by Theodore ft. Herlin, and by other persons holding under him,” an objection of nonjoinder of the tenants not raised in the trial court is entitled to little favor in a court of review, and since it is conceded that all the tenants hold under Herlin there was no absolute necessity that said tenants should have been made parties in order that an effective decree be entered in this cause.

In Blue Island F. S. Co. v. Irrgang, 252 Ill. App. 290, which was a suit to foreclose a mortgage, one Francis J. Sullivan was made a defendant, and it appeared that one Williams was in actual possession as a tenant of Sullivan and that he had no other right, title or interest in the premises. Williams was not made a party defendant. Sullivan appealed to this court seeking a reversal because of the failure to make Williams a party defendant. There the court said at pp. 294, 295 :

“It is also urged that the decree must lie reversed because of the failure to make Williams a party defendant. The report of the master found that ‘said premises are now in the actual possession of William Williams as a tenant of said Sullivan, and he has no other right, title or interest except as a tenant of said Sullivan,’ and the decree makes the same finding. Sullivan took title by deed delivered June 15,1926, and he testified that the lease to Williams would expire in the latter part of 1929. Sullivan filed an answer in which he did not aver the omission of any necessary party, and it is a general rule that unless such an objection is taken by demurrer, plea .or answer it will receive little favor from a court of appellate jurisdiction. Pease v. Chicago Crayon Co., 235 Ill. 391; State Nat. Bank of Springfield v. United States Life Ins. Co., 238 Ill. 148; Martin v. Heymann, 251 Ill. App. 89. There is, of course, no doubt that as a general rule a tenant in possession is a necessary party to a bill praying the foreclosure of a trust deed. Gale v. Carter, 154 Ill. App. 478. In that case, however, the question was definitely raised in the trial court. When the question has not been raised in the trial court, the rule seems to be that this court will not reverse unless the situation disclosed by the record shows an absolute necessity for the reason that no effective decree can be made. Gulick v. Hamilton, 237 Ill. 367. That necessity does not appear upon this record.”

Since on the factual situation disclosed here it was not absolutely necessary to make the tenants in possession parties defendant in order to render an effective decree, and inasmuch as the decree squares with the contractual rights and obligations of the parties it should be and is affirmed.

Decree affirmed.

Soahlah, P. J., and Friehd, J., concur.


author: Mr. Justice Hebel

text:
    Rosa May et al., Appellees, v. Florene May Marx et al., Appellees, and Wilbur D. May et al., Appellants, and Nancy May Straus, Minor, and Martin L. Straus III, Minor, Separate Appellants.
    Gen. No. 40,236.
    Opinion filed March 29, 1939.
    Rehearing denied April 21, 1939.
    William: H. Haight, of Chicago, for certain appellants.

      Albert E. Jenner, Jr., of Chicago, for certain other appellants.
    Benjamin F. Goldstein and Herbert L. Hart, both of Chicago, for certain appellee.
    Montgomery, Hart, Pritchard & Herriott, of Chicago, for certain other appellee.
    Lewis, Rice, Tucker, Allen & Chubb, of St. Louis, Mo., and Sidley, McPherson, Austin & Burgess, of Chicago, for certain other appellees.
   Mr. Justice Hebel

delivered the opinion of the court.

This case comes before this court upon an appeal by certain of the defendants, Wilbur D. May, Morton David May, Sarah Jane May Waldheim, David May II, and Blanche Rose May, together with Nancy May Straus, a minor, and Martin L. Straus III, a minor, from a decree entered in the circuit court of Cook county by the chancellor, construing two certain trust instruments and a certain letter and instructing the plaintiff trustees as to their several duties thereunder.

The proceeding was heard upon a complaint in equity instituted by the plaintiffs as trustees for the construction of a trust instrument executed by David May on October 10,1916, a supplementary trust instrument executed by David May, Florene May Marx and the trustees and dated November 16, 1921, and a letter executed by the same parties and dated October .., 1926. The prayer of this bill of complaint is that the court instruct the plaintiff trustees as to whether certain trust income which they had accumulated should be paid to Florene May Marx or should be retained, and whether future income of the trust should be paid to George Lauter, as trustee, and to Florene May Marx, or should be accumulated and retained,

The court after a hearing found and decreed that the legal effect of the- trust instruments of October 10, 1916, and November 16, 1921, and the letter of October .., 1926, was that Florene May Marx became entitled to have distributed to her or her assigns from time to time at reasonable intervals the entire net income which accrued after February 17, 1928, on one-fourth of the trust estate; that the legal effect of the assignments in trust of November 5, 1937, was such that George Lauter, as trustee, was entitled to receive the net income from the one-fourth trust estate which accrued after November 5, 1937, and which would accrue during* the lifetime of Florene May Marx and prior to February 17,1943, and ordered that the plaintiffs, as trustees:

1. Pay to Florene May Marx the accumulated income from said one-fourth (%) trust estate which accrued during* the period from February 17, 1928, to November 5, 1937;

2. Pay to George Lauter, as trustee, the net income from said one-fourth (%) trust estate which accrued after November 5, 1937, and which would accrue during the lifetime of Florene May Marx and prior to February 17, 1943;

3. Pay to Florene May Marx or her assigns all the net income from said one-fourth (%) trust estate which would accrue during her lifetime and the continuance of said trust after February 16, 1943.

The parties to this proceeding* are Eosa May, Morton J. May, Tom May, Samuel B. Butler and Nathan L. Dauby, trustees under the trust instruments.

The defendants, in addition to Florene May Marx, the principal beneficiary, and George Lauter, as trustee, her assign, are the more remote beneficiaries, as follows:

1. The minor children of Florene May Marx, Nancy May Straus and Martin L. Straus III, her only issue, who appeared in the trial court by their guardian ad litem;

2. Morton J. May, Tom May and Wilbur D. May, the sons of David May;

3. Martin L. Straus, former husband of Florene May Marx; and

4. Morton David May, et al., the issue of the sons of David May.

The pleadings are not questioned, and it also appears from the briefs that there is no dispute as to any of the facts.

The complaint states that the plaintiffs are trustees of a certain trust created by David May in St. Louis, Missouri, by an instrument dated October 10, 1916, which provided that the trust property should be held until Florene May Marx, daughter of David May, became 25 years of age or sooner married with the approval of her mother, Rosa May, at which time onefourtli of the trust estate should be paid to her, after which the income on the remainder should be paid to her until she became 45 years of age, when the remainder of the trust estate should be paid to her if the trustees believed wise; that a supplementary trust instrument executed by David May, Florene May Marx, and the trustees in St. Louis, Missouri, on November 16, 1921, provided that the entire trust fund then in the hands of the trustees should remain intact and undistributed except as therein provided, and said instrument provided further that the trust fund should be paid to Florene May Marx when she became 60 years of age, or, if the trustees deemed it wise and proper, at any time prior thereto and after she became 45 years of age, and that if Florene May Marx should die before the termination of the trust, the trust fund should be held in trust for her surviving issue, or, in default of such issue, should be paid to the sons of David May and their issue, per stirpes, and to Martin L. Straus; that a letter executed by David May, Florene May Marx, and the trustees on October .., 1926, provided that until Florene May Marx be 25 years of age, the income of the trust should be accumulated and treated as principal, and that after she became 25 years of age, the income should be paid to her currently; that Florene May Marx was born February 17, 1903, and married Martin L. Straus, with the consent of her mother, Rosa May, on May 19, 1921; that Nancy May Straus and Martin L. Straus III, minors, are the only issue of Florene May Marx, and that they are made defendants individually and as representatives of all who may become issue of Florene May Marx; that Morton J. May, Tom May, and Wilbur D. May, the only sons of David May, Morton David May and Sarah Jane May Waldheim, the only issue of Morton J. May, and David May II and Blanche Rose May, the only issue of Tom May, are made defendants individually and as representatives of all who may become issue of the sons of David May; that Martin L. Straus executed, on April 30, 1934, an instrument releasing and waiving all his rights under the trust instrument; that since February 17, 1928, the date on which Florene May Marx became 25 years of age, the plaintiffs have paid to her all income from three-fourths of the trust estate, but have retained and accumulated the income on the other one-fourth of said trust estate; that plaintiffs believe Florene May Marx or her assigns, is entitled to receive all income accrued after February 17, 1928, on said one-fourth of said trust estate, but that the other defendants claim or may claim some adverse interest; that plaintiffs are impartial and will pay said accumulated income or retain the same, as the court may direct; that on November 5-, 1937, Florene May Marx executed instruments assigning to each, George Lauter, as trustee for Nancy May Straus, and George Lauter, as trustee for Martin L. Straus III, one-half of the income on one-fonrth of said trust estate (as the same existed on February 17,1928), accruing after November 5, 1937, and prior to February 17, 1943; that plaintiffs believe George Lauter, as trustee, is entitled to receive said income for said period, but that the other defendants claim or may claim some adverse interest; that the plaintiffs are impartial and will pay all income accrued and to accrue on the said one-fourth trust estate, or accumulate the same as the court may direct.

The answer of Florene May Marx admits the allegations of the complaint, but states that it was not her understanding or intention that the supplementary trust instrument of November 16, 1921, would or did restrict her rights to the net income accruing after February 17, 1928, upon the trust estate, and further denies that it was the intention of any of the parties to the instrument to restrict her rights to the net income.

The answer of the other defendants was filed in which they admit the execution of the instruments; also the answer of the guardian ad litem, in which he states that he has no information regarding the allegations of the complaint, and submits the rights and interests of the minors to the consideration and protection of the court.

The brief and argument filed on behalf of Florene May Marx, et al., admits the statement of the case contained in the brief filed on behalf of Wilbur D. May, et al., is both accurate and sufficient.

Florene May Marx contends that the instrument dated October 10, 1916, created a trust under which Florene May Marx became entitled upon her approved marriage, May 19,1921, to receive the one-fourth trust estate, and so thereafter to receive all income accruing thereon.

In reply to this contention of Wilbur D. May, et al., it is admitted that if the 1916 instrument alone is considered the contention of Florene May Marx may be conceded, but further suggest that this court is called upon to construe not merely the 1916 instrument alone, but the 1916 instrument as affected by the supplemental trust of 1921, and by the subsequent conduct of the settlor, David May, and his daughter, Florene May Marx.

Florene May Marx, George Lauter, as trustee, and the plaintiff trustees, admit that Florene May Marx is entitled to receive at this time all income accruing on the one-fourth trust estate subsequent to February 17, 1928, and prior to November 5, 1937; that George Lauter, as trustee, is entitled to receive currently all income accruing and to accrue on the one-fourth trust estate subsequent to November 5, 1937, and prior to February 17, 1943, if Florene May Marx lives that long; that Florene May Marx is entitled to receive all income accruing on the one-fourth trust estate subsequent to February 17, 1943, and that, therefore, for réasons adopted by the trial court, the court’s conclusion is correct.

The instrument of October 10, 1916, created a trust under which Florene May Marx became entitled upon her approved marriage, May 19, 1921, to receive the one-fourth trust estate and therefore to receive all income accruing thereon. By her marriage, which was approved by her mother, she became entitled to receive one-fourth of the trust estate under the instrument dated October 10, 1916, and being the owner of the interest, she was entitled to receive all income accruing thereon, and subsequently she joined with her father in the execution of the agreement dated November 16, 1921, and by so doing created a new trust of the one-fourth trust estate, the ownership of which was in her. Under this new trust, the trustees, who happened to be the same persons who were the trustees under the 1916 instrument, from which the one-fourth trust estate was carved, were directed to hold said property on certain new trusts specified in the November 16, 1921 instrument and not contained in the previous trust. Such new provisions included remainders over in the event of the death of Florene May Marx prior to the termination of the trust, and since Florene May Marx was the then absolute owner in fee simple of the one-fourth trust estate, no other person could deal with the property in any way by subjecting* it to a trust or otherwise, without her consent. Wilbur D. May, et al. contend that no new trust was created because of the fact that David May signed the November 16, 1921, instrument, and purported to speak therein as grantor.

As indicated, we have reached the conclusion that Florene May Marx was the present owner of the one-fourth interest and her interest was such that she could be bound only by the instrument dated November 16, 1921, in the execution of which she joined with her father, and it would seem that the instrument created a new matter as far as her one-fourth interest is concerned and the control of this property.

The 1921 instrument dealt also with the three-fourths trust estate, and by the instrument David May evidenced the transfer and disposal of his interest in the three-fourths trust estate by joining in the execution of the instrument, and as suggested in the brief of Florene May Marx, a new trust was created by Florene May Marx of the one-fourth trust estate that was owned by her. This she could do without requiring her father’s signature and without his speaking, but as the same instrument likewise dealt with the three-fourths trust estate in the manner stated in this opinion it was necessary that David May execute it, and the fact that David May joined in one instrument with Florene May Marx, who was speaking for the one-fourth trust estate, does not destroy the legal effect or significance of her signature otherwise existing with respect to said one-fourth estate.

November 16, 1921, instrument is silent as .to the income accruing on the one-fourth trust estate after the date of its execution.

We agree with the suggestions made by the defendant Florene May Marx that hers was the only vested interest in the trust, and that all others were contingent ; that her interest was in fee, subject to be divested only by her death, so that so long as she lived she was the owner of the fee; she not only had no issue at the time the 1921 instrument was executed, but might never have any. Under these circumstances, it is probable that she or her father did not intend to have the income accumulate and be treated as principal to be distributed to her at a remote future date, or, in the event of her death prior thereto, to persons who were not yet in existence. It has been suggested, that in the absence of express or necessarily implied intention that income on vested interests be accumulated, the law requires its current distribution.

It is to be noted that if the income under the 1921 trust were to be accumulated until the distribution of the principal at the termination of the trnst, such accumulation might last for a total period of 62 years (in the event Florene May Marx died February 15, 1963, leaving a child one day old). Accumulation for such a long period is not favored by the law. At common law, express accumulation of income beyond the period set by the rule against perpetuities is void, so by statute, many States have cut down the common law period of permissible accumulations. Under a majority of these statutes, the possible period of accumulation urged by Wilbur D. May, et al. would render the provision void.

Illinois Rev. Stat. 1937, ch. 30, par. 153, sec. 1 [Jones Ill. Stats. Ann. 135.02], is an act to restrain all trusts and directions in deeds or wills whereby the profits or produce of real or personal estate shall be accumulated, and the beneficial enjoyment thereof postponed for a longer term than the life or lives of any grantor, settlor, or for any longer than the term of 21 years from the death of any such grantor, devisor or testator, or for any longer than during the minority or respective minorities of any person or persons who shall be living, and by the provision of this act accumulations are limited for the period fixed by the statute, which general principle of law is admitted by the defendant Wilbur D. May, et al.

Failure to provide for the distribution of income, the law presumes that the grantor intended that the income go to the beneficiary who is presumptively entitled thereto, and this same result is accomplished by the statutes prohibiting accumulations, which invariably provide that income, the accumulation provision for which is void, shall be paid to the person who is presumptively entitled thereto.

By the creation of this new trust, which was accomplished by a written instrument which the trustees signed evidencing their acceptance of the property under the terms of the new trust, the trustees accepted the surrender by Florene May Marx to them of her interest in the one-fourth trust estate and thereby terminated the 1916 trust as to the property surrendered. She was entitled to receive this one-fourth trust estate, and as a part of this trust estate in which she joined she was entitled to receive the accumulated income thereon immediately upon the execution by the trustees of the November 16, 1921, instrument.

What we have said with reference to the decree of the trial court indicates that our views are in accord with those of the court. We have given consideration to all the questions involved and believe we are justified in affirming the decree construing the instruments as therein expressed.

Decree affirmed.

Denis E. Sullivan, P. J., concurs, and Burke, J., takes no part.

A petition for rehearing accompanying a motion to amend the opinion has been filed, and upon consideration the court reconsiders the language in next to the last paragraph of this opinion, cause No. 40,236, and modifies the same to read:

By the creation of this new trust, which was accomplished by a written instrument which the trustees signed evidencing their acceptance of the property under the new trust, the trustees accepted the surrender by Florene May Marx to them of her interest in the one-fourth estate and thereby terminated the 1916 trust as to the property surrendered, and by the letter of October —, 1926, the defendant, Florene May Marx relinquished her right to receive as it accrued the income on the one-fourth trust estate prior to February 17, 1928; that the income during that period became part of the principal of the trust to be distributed in the manner and within the same time as the principal of the estate is required to be distributed. That by the petition for rehearing, the various parties to this appeal acquiesce in the modification made by the court.


text:
    People of the State of Illinois, Defendant in Error, v. William Levy, Plaintiff in Error.
    Gen. No. 40,341.
    Opinion filed March 29, 1939.
    Rehearing denied April 14, 1939.
    Wm. Scott Stewart, of Chicago, for plaintiff in error.
    Thomas J. Courtney, State’s Attorney, for defendant in error; Edward E. Wilson, John T. Gallagher, Melvin S. Rembe and Blair L. Yarnes, Assistant State’s Attorneys, of counsel.
   Mr. Justice Hebel

delivered the opinion of the court.

William Levy, a defendant, was convicted in the criminal court of Cook county after waiving a jury, for conspiracy to rob, and sentenced to the penitentiary. He prosecutes this writ of error.

The indictment for conspiracy alleges that Robert Schaefer and William Levy, on February 25, 1938, conspired with each other and with divers other persons, whose names are unknown, to rob Louise Hansen and steal a wrist watch of the value of $650, contrary to the statute. A plea of not guilty was entered. The jury waiver was signed as to each defendant, the State consenting. On motion of the State, severance was granted to the defendant Levy. Testimony was heard as to the defendant Levy, and at the close of the State’s evidence, a motion for a finding of not guilty was entered and denied as to this defendant. The finding of the court at the close of the evidence was that defendant Levy was guilty of conspiracy to commit robbery in manner and form as charged in the indictment. Motion of the defendant in arrest of judgment was entered and overruled and exception. Thereupon the court sentenced the defendant on the finding and judgment to the penitentiary for a term of from one to five years, one dollar fine and no costs.

The evidence of the complaining witness, Louise Hansen, was introduced by stipulation, from which it appears she was an entertainer at Ann Millstone’s Club, 1210 Bast 63rd street, Chicago; that she owned a platinum diamond wrist watch of the value of $650, which she had been wearing; that Levy, who had a reputation as a repairer of jewelry, asked her to take this watch off and he examined it carefully; that he took out the works and said it was the neatest piece of machinery he had ever seen, and that he could duplicate it for $125. There was attached to this wrist watch a black wrist band, and" Levy stated he could get her a diamond band very cheap. Schaefer, the other defendant, testified that he knew Miss Hansen by sight; that he knew the defendant Levy and saw him aronnd the Ann Millstone Club about 10 times; that he talked with him about that number of times; that the first time he talked with Levy about Miss Hansen’s watch was in February; that he had three conversations with Levy in respect to the watch; that Levy asked Schaefer if he wanted to make a little extra money and if he could hold up Miss Hansen and get the watch. When asked if he cared to make some money Schaefer answered yes and Levy said if he could get the watch he, Levy, would give Schaefer $50; that defendant Levy said it was a good watch and he wanted to get it and for Schaefer to get it by holdup and bring it to him. They talked again about the watch the next evening and Levy asked him if he had secured it. Schaefer said no and defendant said that they would try again that night. On the second night, or at the second conversation in respect to the watch Levy gave Schaefer a pistol.

There is also evidence of a third conversation in respect to the holdup at which G-reinke was present, and the three, Levy, Schaefer and Greinke were drinking beer together. • Levy had bought drinks for Schaefer on several occasions, especially the nig'ht of the talk in respect to stealing the watch. Schaefer introduced Greinke to Levy and Levy said, “Are you boys going to get this tonight?” and they answered, “We don’t know, we’ll try.” They did not see Levy after this night because they were arrested with the gun in their possession and told the officers where they obtained the gun. The first time Levy talked to Schaefer about gutting the watch he was supposed to give Schaefer $50. Schaefer said, “I did not give it a thought whether I would do it or not. I just went along with him. Hp to the time I saw Miss Hansen leave I intended to carry through the agreement.”

It further appears from the testimony of Harry Greinke that he met Levy and Schaefer at the Ann Millstone Club, and that he heard a part of the conversation between Schaefer and Levy outside of the Millstone Club in February. Levy told Schaefer about a wrist watch, where it was and where Louise Hansen lived. He said she worked at the night club, went home late at night down 63rd Street to Kimbark. Levy said he wanted Schaefer to get her watch and said further that there was a gun and for Schaefer to get the watch even if he had to break in to get it. This witness was with Schaefer when Schaefer was arrested and the gun they used in robberies was the gun that came from Levy. When Levy was arrested he denied that he knew Schaefer.

At the trial Levy testified, and from his testimony it appears that he admitted he was acquainted with Schaefer, and had purchased drinks for him; that this happened in February or March, but stated that he did not converse with him and did not see him after that. This defendant denied the statements made by Schaefer and he also stated that he never met Greinke until he was in custody at the Woodlawn Police Station. Afterward he admitted on' cross-examination that he knew Louise Hansen and had seen the watch and examined it.

The defendant Levy in the case before us contends that there was no proof of conspiracy and that the only evidence tending* to show conspiracy was given by an accomplice and that such accomplice was not corroborated. The People, however, answer to this contention that there was clearly an agreement to rob Miss Hansen; that the agreement was the gist of the conspiracy and the crime was complete when the agreement was entered into; further, that a defendant may be convicted on the uncorroborated evidence of an accomplice but that in the instant case there was corroboration by Greinke and by the fact that Schaefer knew nothing about the watch until told by the defendant, and that the defendant had examined a $650 watch and intimated that he could duplicate it for $125.

At the conclusion of this hearing' the court found the defendant Levy guilty and sentenced him to imprisonment in the penitentiary, but as to the disposition of the case as against Schaefer in this alleged conspiracy, the record is silent, except it appears in the bill of exceptions filed by the defendant Levy that the court considered what is called SOL 550, being the number of the indictment involved in the case. Just what that means, we are unable to determine. So it appears as a fact that Schaefer, the other defendant indicted with Levy, has not been tried, and we cannot determine whether the court entered a judgment of guilty or not guilty in the matter so far as this conspirator is involved.

From the facts as established by the evidence in this case the trial court was fully justified in finding the defendant Levy guilty beyond a reasonable doubt of the crime of conspiracy to rob, and this conclusion of the trial court is sustained by the Supreme Court in the case of People v. Drury, 335 Ill. 539, where the court laid down the rule that applies and said: “The essence of a conspiracy is not the accomplishment of the unlawful object, but it is the unlawful combination or agreement to accomplish the criminal or unlawful purpose. The conspiracy is complete when the unlawful combination or agreement is made, regardless of any subsequent interruption of the efforts to carry out the object of the conspiracy. (People v. Lloyd, 304 Ill. 23.) It is not necessary to prove any overt act towards the accomplishment Of the unlawful purpose. (People v. Glassberg, 326 Ill. 379; People v. Robertson, 284 id. 620;) nor is it necessary to prove that the conspirators agreed, in terms, to pursue the common design. The conspiracy may be proved by direct evidence or by the conduct of the parties, by statements, documents, facts and circumstances which disclose a common design on the part of the accused persons to act together in pursuance of a common criminal purpose.” So that in the instant case, as the court has stated in the opinion just cited, the essence of the conspiracy is not the accomplishment of the unlawful object, but it is the unlawful combination or agreement to accomplish the criminal or unlawful purpose. Here we have the evidence of the conspirators who agreed for the purpose of robbing Louise Hansen of her property, and by the agreement, as outlined in the evidence, the conspiracy to rob was entered into by these parties, and as previously stated, we are of the opinion that from all the facts as they appear in the record the court was fully justified in finding the defendant Levy guilty of this crime. However, as to whether the judgment was a proper one, we have considered the question as to what must be the judgment of the court in the trial of two named defendants charged with conspiracy such as we have before us.

The rule of law that has been approved by the several courts of appeal in the trial of indictments for a conspiracy is that separate trials may be granted and the cause proceed to judgment, provided, of course, it appears from the record that in the trial for conspiracy of two named as defendants it is necessary that both be found guilty. If only one defendant is found guilty and the other not guilty, it would follow that both would be acquitted. But in this case the defendant Levy was found guilty and no disposition made of the indictment so far as the defendant Schaefer was involved, and it would seem from the authorities, and more especially from the opinion of the Supreme Court of Wisconsin upon a like question in the case of Casper v. State, 47 Wis. 535, wherein the court said: “When a prisoner is alone indicted for a conspiracy with others unknown, or when he is indicted with others who cannot be taken or brought to trial, there appears to be no valid objection to that practice (separate trials); for the verdict against him is that he was guilty with others who cannot be brought to trial, and there is no presumption in his favor of their innocence. But where several are prosecuted together, taken, and may be brought to trial, for conspiracy, and, their trial being severed, one only has been tried and found guilty, there is manifest impropriety in proceeding to judgment against him before the trial of his codefendants. The verdict against him would raise no presumption against them, and their acquittal would be inconsistent with his conviction, and should operate in law to acquit him also. Judgment against him, in such case, would not only be a cruel injustice, but an absurdity, which the law ought not to sanction; for one only cannot be guilty of conspiracy, and judgment against one, upon acquittal of those charged with him, would be not only a wrong to the person, but a blunder in law.” The court concluded that the judgment which had been entered in that case should be reversed as being premature, but the verdict to stand pending the prosecution of the other defendants. In the meantime the defendant appealing was to be held in custody, or under recognizance from term to term of the court below, to receive judgment upon the verdict.

The reasoning in the Wisconsin case applies with equal force to the facts in the case before this court. The defendant Levy was the only one found guilty of this charged conspiracy, and his cooonspirator, Schaefer, has not been tried, nor his case disposed of, so that this court is not in a position to properly determine the questions involved in this proceeding.

In view of the condition of the record, it is necessary that the judgment be reversed, but the finding of the court of guilt of the defendant Levy to stand pending the prosecution of the other defendant Schaefer. In the meantime, defendant Levy who has brought this writ of error is to be held in custody, or under recognizance from term to term of the court below to receive judgment upon the finding at the conclusion of the final judgment entered as to the guilt or innocence of the defendant Schaefer, the coconspirator.

For the reasons stated, the judgment is reversed and the cause is remanded.

Reversed and remanded.

Denis E. Sullivan, P. J., concurs, and Burke, J., takes no part.