text:
    Central Trust Company of Illinois, Complainant and Appellee, v. Sheridan Beach Hotel Building Corporation and Albert Pick & Company, Defendants. Albert Pick & Company, Appellant.
    Gen. No. 34,411.
    Heard in the second division of this court for the first district at the June term, 1930.
    Opinion filed December 16, 1930.
    Ringer, Wilhartz & Hirsch, for appellant; Samuel E. Hirsch and Sidney J. Wolf, of counsel.
    Poppenhusen, Johnston, Thompson & Cole, for appellee; James W. Hyde, Frederick Mayer and Clifton J. O ’Habra, of counsel.
   Mr. Justice G-ridley

delivered the opinion of the court.

On April 14, 1926, the G-reenebaum Sons Bank & Trust Co. (hereinafter called the G-reenebaum Bank) as trustee, filed its bill in the circuit court against the Sheridan Beach Hotel Building Corporation (hereinafter called the Hotel Co.) to foreclose a chattel mortgage, dated February 11,1924, duly acknowledged and recorded on February 24,1924, and given by the Hotel Co. to further secure the payment of its 1,300 bonds, aggregating $650,000, all dated July 20, 1922, maturing at different dates thereafter (the last bonds maturing on August 1, 1932), and bearing 7 per cent interest per annum as evidenced by interest coupons. The bill also prayed for the appointment of a receiver. The personal property included in the mortgage consisted of furnishings, utensils, equipment for hotel purposes, etc., located in or about the apartment hotel building, known as the “Sheridan Beach Hotel” at the northeast corner of Sheridan Road and Chase Avenue, Chicago, Illinois. On May 20, 1926, a receiver was appointed and he took possession of the property and has ever since been in possession. On August 4, 1926, the Hotel Co. filed its answer. More than a year after the receiver had taken possession, Albert Pick & Company (hereinafter called Pick & Co.) on September 16, 1927, recovered a judgment against the Hotel Co. for $71,302, upon which execution was issued, and on February 28, 1928, Pick & Co. was granted leave to be made a party defendant to the bill. On March 14,1928, it filed its answer, setting np the judgment, attacking the validity of the chattel mortgage and claiming a first lien on the property. On October 20, 1928, the cause was referred to a master to take evidence and' report the same, together with his conclusions of law and fact, and after a hearing the master, on January 30, 1930, filed his report in which after making numerous findings he concluded that complainant’s chattel mortgage was a valid one and constituted a prior lien on the property as against the lien of Pick & Co. by virtue of its said judgment, and that the equities of the cause were with complainant. He recommended that a decree of foreclosure be entered in accordance with the prayer of the bill. The overruled objections of Pick & Co. to the report were ordered to stand as exceptions, and on March 21, 1930, the court overruled the exceptions, confirmed the master’s report and entered the decree of foreclosure which Pick & Co. by this appeal seeks to reverse.

The material facts as shown by the evidence and as found by the court are as follows: On July 12,1922, the Hotel Co., being desirous of obtaining a building loan for the erection and equipment of the hotel building on its said real estate, entered into a written loan agreement with the Greenebaum Bank, whereby a bond issue of $650,000, to be secured by a trust deed on the real estate, was to be made, and, after the erection of the building, to be further secured by a chattel mortgage on the personal property and equipment to be placed in the building. It is stated in the agreement, inter alia, that the Hotel Co. will equip the building with all necessary machinery, fixtures, utensils and other equipment suitable for the operation of such a building and of a quantity and quality to be approved by the Greenebaum Bank. After providing for the giving of the trust deed it is stated that the bonds “shall be further secured by a chattel mortgage,” of such form and containing such covenants as shall be satisfactory to the G-reenebaum Bank, upon said personal propery and equipment, together with all renewals or replacements thereof, and “which chattel mortgage shall contain adequate covenants by us (the Hotel Co.) to continue in force the lien of said mortgage by renewal or re-execution of the mortgage until the indebtedness evidenced by said bonds has been fully paid.” It is further stated in the agreement that the G-reenebaum Bank shall not be required to pay out any of the proceeds of the loan until proof is furnished to its satisfaction that funds had been provided by the Hotel Co., through other sources or through credit or other financial arrangements, so that the balance of the loan may be sufficient to fully complete the building, and pay for all the furnishings, utensils and equipment thereof, free and clear of all liens and incumbrances which may be superior to the trust deed and chattel mortgage securing the bonds. On July 20,1922, the bonds were executed by the Hotel Co. and also the trust deed securing them, recorded August 2, 1922. On the bonds there is a statement that “the payment hereof, with interest thereon, is further secured by a chattel mortgage, ” conveying to the G-reenebaum Bank, as mortgagee, all furnishings, utensils, hotel equipment, etc., contained in or about the building on said premises, “with all renewals and replacements thereof, for a full description of which . . . said chattel mortgage, and the terms and conditions under which this bond is issued, secured and held, reference is made to said deed of trust and chattel mortgage.”

In January, 1923, before the proceeds of the loan were paid out by the G-reenebaum Bank, a conference was had between Edgar N. G-reenebaum, its vice president, David Frank, vice president of Pick & Co,, and Robert' W. Dunn, attorney for the Hotel Co., at which there was discussion as to the sale by Pick & Co. to the Hotel Co. of the furnishings, utensils, hotel equipment, etc., to be secured by a chattel mortgage, and it was verbally agreed that Pick & Co. was to. receive, in payment of said personal property, $40,000 in cash, in two instalments of $20,000 each, and notes of the Hotel Co., aggregating $60,000, to be collaterally secured by $90,000 worth at par of second mortgage bonds to be issued by the. Hotel Co., and that the indebtedness of Pick & Co. was not to be secured by any chattel mortgage on the property, because such a mortgage was to be given by the Hotel Co. to the Greenebaum Bank in further security of said first mortgage bonds of $650,000, as provided in said loan agreement of July 12, 1922. This verbal agreement was afterwards embodied in certain letters which passed between the interested parties and which were introduced in evidence on the hearing before the master. In pursuance of this agreement and at the direction of the Hotel Co., the Greenebaum Bank, out of the proceeds of said loan, made the two cash payments of $20,000 to Pick & Co.,— one on January 31, 1923, and the other on August 8, 1923, and at said times Pick & Co. signed and delivered certain waivers of mechanic’s liens on the land and building covered by said deed of trust, for said personal property so to be furnished and delivered to the building. And on September 15, 1923, the Hotel Co. executed and delivered to Pick & Co. its 30 notes, each for $2,000 and aggregating $60,000, and on October 18, 1923, the Greenebaum Bank, in pursuance of said agreement and upon the written direction of the Hotel Co., delivered to Pick & Co. $90,000 worth at par of said second mortgage bonds of the Hotel Co. as collateral security for its said notes aggregating $60,000. Said personal property, so sold by Pick & Co. to the Hotel Co., was delivered to the hotel building between January 31, 1923, and June 16, 1924, and most of it prior to February 11, 1924, the date of the chattel mortgage. No payments were made by the Hotel Co. to Pick & Co. on account of the property so furnished, or on account of said collateral notes after January 6, 1924. As soon as practicable, about February 11,1924, and after most of the property had been delivered to and placed in the building, the chattel mortgage here sought to be foreclosed was drafted, executed and recorded. Subsequent to the execution and delivery of the bonds, and prior to the filing of the present bill, all of the bonds, aggregating $650,000, were sold and transferred to one Michael E. White and, when said bill was filed, he was the owner thereof.

Bonds Nos. 1 to 40, inclusive, matured on August 1, 1924, and bonds Nos. 41 to 90, inclusive, matured on August 1, 1925. The Hotel Co. failed to pay any of these bonds, or the matured interest coupons on them or on other bonds, and the default in payment continued for more than 30 days. Thereafter the Greenebaum Bank, as trustee, declared the entire bonded indebtedness to be due and payable, and on April 14, 1926, filed its bill to foreclose said trust deed securing all of the bonds, and, on the same day and prior to the expiration of three years from the recordation of said chattel mortgage on February 24, 1924, also filed the present bill to foreclose said chattel mortgage. Such proceedings thereafter were had in the action to foreclose the trust deed as resulted in the entry of a foreclosure decree on November 5, 1928, and on December 7,1928, the real estate and building were sold at a master’s sale, and the proceeds thereof were applied to the payment of the indebtedness evidenced by the bonds, accrued interest, etc. On December 14, 1928, a deficiency decree for $125,000 was entered against the Hotel Co., for which it was adjudged to be personally liable to the Greenebaum Bank.

In the decree appealed from the court made findings, among others, substantially as follows:

That the bonds secured by the chattel mortgage being foreclosed in this cause were merged in the decree of foreclosure of the trust deed, which decree was satisfied by the master’s sale except as to the sum of $125,000, and interest thereon; that since the entry of the deficiency decree and about May 4, 1929, there was paid to complainant, as trustee under the trust deed, to apply on the amount due on the deficiency decree, the sum of $33,000; and that there is now due on the decree the sum of $94,551.91, and legal interest from May 4, 1929.

That at the time the present bill was filed (April 14, 1926) and at the time the receiver took possession of all of the property covered by the chattel mortgage (May 20, 1926), Pick & Co. “had no right or interest in said property within the meaning of Section 1 of chapter 95 of the Illinois statutes relative to chattel mortgages, and did not obtain any right or interest in said property within the meaning of said Act until September 16, 1927, when it obtained its judgment against said Sheridan Beach Hotel Corporation” ;■ that the taking of such possession by the receiver “constituted and was a lawful taking of such property under said chattel mortgage by or on behalf of said complainant mortgagee, and makes said chattel mortgage in law valid, so far as the parties to this suit are concerned, irrespective of the requirements of section 1 of chapter 95 of said Illinois statutes.”

That complainant, as such trustee and mortgagee, “has a first and prior lien” upon the property described in the chattel mortgage for the sum of $94,551.91, and legal interest thereon from May 4, 1929, and for its costs, solicitor’s fees of $5,000 as found, etc., and that, subject and subordinate to complainant’s lien, Pick & Co. has a second lien on the property for the amount of its judgment of $71,302, interest and costs.

And the court adjudged and decreed that the Hotel Co., personally liable for said debt, pay to complainant, as trustee and mortgagee, within 10 days, the sum of $94,551.91 and interest thereon, the solicitor’s fees awarded and the costs of suit, and that in default of such payment the property, or so much thereof as may be necessary, be sold by the master at public sale in the usual manner, etc.

The main ground urged by counsel for Pick & Co. for a reversal of the decree appealed from is that the chattel mortgage is void as against the rights and interests of Pick & Co., — it having obtained a judgment against the Hotel Co. for $71,302, on September 16, 1927, upon which execution was issued. It is argued in substance that the mortgage is void because a part of the bonded indebtedness which it secured did not mature until August 1, 1932, — more than three years after the execution and recordation of the mortgage in February, 1924. Sections 1 and 4 of the Chattel Mortgage Act in force in February, 1924 (Cahill’s St. 1923, ch. 95, Till 1 and 4, pp. 2320-1) are as follows:

“1. That no mortgage, trust deed or other conveyance of personal property having the effect of a mortgage or lien upon such property, shall be valid as against the rights and interests of any third person, unless possession thereof shall be delivered to and remain with the grantee, or the instrument shall provide for the possession of the property to remain with the grantor, and the instrument is acknowledged and recorded as hereinafter directed; and every such instrument shall, for the purposes of this Act, be deemed a chattel mortgage.”
“4. Such mortgage ... of personal property acknowledged as provided in this Act, shall be admitted to record by the recorder of the county in which the mortgagor shall reside at the time when the instrument is executed and recorded, . . . and shall thereupon if bona fide, be good and valid from the time it is filed for record until ninety days after the maturity of the entire debt or obligation or until ninety days after an extension of the time of payment thereof made as hereinafter provided: Provided, that such maturity' shall not exceed three years from the filing of such instrument for record unless within ninety days after the expiration of said three years, . . . the mortgagor and mortgagee . . . shall file for record ... an affidavit setting forth particularly the interest which the mortgagee has by virtue of such mortgage in the property therein mentioned, and if such mortgage is for the payment of money, the amount remaining unpaid thereon, and the time when the same will become due by extension or otherwise; which affidavit shall be recorded by such recorder, and thereupon the mortgage lien originally acquired shall be continued and extended until ninety days after the expiration of such period of extension of the time of payment; Provided, such extension of the time of payment shall not exceed one year from the filing of such affidavit. ’ ’

After reviewing the provisions of the chattel mortgage, the facts here disclosed, the provisions of said Chattel Mortgage Act and of prior acts- and numerous decisions thereon, the findings of the decree and the exhaustive briefs and arguments of opposing counsel, we are of the opinion that the chattel mortgage here in question is valid as between the G-reenebaum Bank and the Hotel Co., and that, possession of the mortgaged property having been taken by the receiver at the instance of the Bank within three years of the execution and recordation of the mortgage and before the lien of the judgment of Pick & Co. had attached, Pick & Co.’s said lien is subordinate to complainant’s lien on the mortgaged property for $94,551.91, interest, solicitor’s fees, costs, etc., as decreed by the circuit court. In Cook v. Thayer, 11 Ill. 617, there was involved the validity of a chattel mortgage given to secure a note that matured more than two years after its date. The mortgage (like the present one) provided that the property might be retained by the mortgagor until the maturity of the note. At this time a statute of Illinois (section 3, eh. 20 of the statutes of 1845, quoted in the opinion) was in force. It was contended that the provision, authorizing the mortgagor to retain the possession until default shall be made in the payment of the note, which had three years to run from the date of the mortgage, rendered the mortgage fraudulent and void in law, but the court held otherwise, saying (p. 618): “The true meaning of the statute is, that a mortgage on personal property, duly acknowledged and recorded, and containing a provision that the property may continue in the possession of the mortgagor, shall, if made in good faith and to secure an honest debt, be good and valid against creditors and purchasers for the space of two years after the same is recorded; and not that a mortgage, which has a longer period to run, is without the protection of the statute altogether. It continues valid- and operative for two years whether the debt, which it is designed to secure, then becomes due or not. At the expiration of the two years, it ceases to be valid, as against creditors and purchasers, unless the possession-of the property is transferred to the mortgagee.” In Keller v. Robinson & Co., 153 Ill. 458, the decision in Silvis v. C. Aultman & Co., 141 Ill. 632 (arising under the Chattel Mortgage Act of 1874, as amended .in 1887) was distinguished, — the court saying (p. 465): “We think it clear that the amendment of 1891, in force when the mortgage in question was executed, was intended to, and does in clear and explicit terms, authorize the making of a chattel mortgage to secure an indebtedness due after the expiration of two years from the time it is filed for record, its validity after the two years depending only upon filing the required affidavit within thirty days next preceding the expiration of that period.” Furthermore, the courts of review in this State have several times construed what is meant by the clause “as against the rights and interests of any third person,” as contained in the Act in question and in prior acts. In Allcock v. Loy, 100 Ill. App. 573, 575, it is said: “The mortgage was a valid mortgage as between appellant and the mortgagor, . . . The requirements of sections 1, 2, 3 and 4, of the Chattel Mortgage Act apply only as to interested third persons, and do not in any manner affect the status of the parties to the instrument. The third person that may avail of the statute must have an interest in the property, such as that of subsequent purchaser, subsequent incumbrancer, lienor, judgment creditor, or an officer, bailiff or custodian in possession by virtue of a valid writ, execution or warrant.” (Citing Sumner v. McKee, 89 Ill. 127, 132.) In Ogden v. Minter, 91 Ill. App. 11, 14, it is said: “Our conclusion is that while the transactions are valid as between the parties, they would not be valid against third persons with respect to rights or interests that might attach before possession should be taken under these defectively executed instruments. Although the possession of personal property by the mortgagor may be fraudulent in law as against creditors and purchasers, by reason of the mortgage not having been properly executed, acknowledged or recorded, still if the mortgagee actually obtains possession before any other rights attach he will hold the same position he would if there had been no defect in the execution, acknowledging or recording, or as if the possession had passed to him at the time the mortgage was given.” (Citing Frank v. Miner, 50 Ill. 444, 448, and other cases.) In Southern Surety Co. v. Peoples State Bank of Astoria, 332 Ill. 362, the court, after stating the substance of section 1 of the Chattel Mortgage Act, says (p. 367): “If this instrument was a chattel mortgage and plaintiff in error took possession of the property before ariy right of lien attached, its title under the mortgage was good against everybody, although the mortgage was neither acknowledged nor recorded as provided by statute. ’ ’ In the present case the bill of the G-reenebaum Bank to foreclose the chattel mortgage was filed on April 14, 1926, and at its instance a receiver Was appointed and that receiver took possession of all the property included in the mortgage on May 20,1926. It was not until more than a year thereafter that the lien of the judgment of Pick & Co. of September 16, 1927, had attached. And it is the law that, where, as here, a bill to foreclose a chattel mortgage is filed by the mortgagee, asking for such foreclosure and also for the appointment of a receiver, and such receiver is appointed and takes possession of the mortgaged property before any right or lien of any third person has attached, such taking of possession of the property by the receiver as against such third person has the same effect as if possession had been taken by the mortgagee. (Commonwealth Trust Co. v. Salem Light, Heat & Lower Co., 77 N. H. 146, 147; Wolcott v. Ashenfelter, 5 New Mex. 442, 453; Central Trust Co. of New York v. Worcester Cycle Mfg. Co., 86 Fed. 35, 38.) In the last cited case it is said: “Possession taken by a court through its receiver, at the instance of a mortgagee, is recognized by the courts as equivalent to the mortgagee’s taking possession for this purpose; True, the court holds generally for the parties until what appears at the outset is determined by decree, but, if the decree follows, it determines the character of the possession from the beginning.”

And, in our opinion, there is another reason why the decree appealed from was right and should be affirmed. It appears that the Hotel Co., about the time it applied for the loan, made an agreement with the Greenebaum Baiilc, wherein it was recognized that the proceeds of the loan might not be sufficient to construct the proposed building and also* pay for the hotel equipment, and wherein the Greenebaum Bank retained the right to refuse to pay out the money until the Hotel Co. had provided additional funds, through other sources or through other credit or financial arrangements, sufficient to complete all of the work contemplated (viz., building and hotel equipment), and which, when completed, would be free from all liens superior to the trust deed and chattel mortgage, given to secure the bonds evidencing the loan. It further appears that before the money was paid out by the Greenebaum Bank, representatives of the interested parties met and had a conference; that as a result of the conference an agreement was made and thereafter consummated, as above stated in this opinion, whereby Pick & Co., out of the proceeds of the loan, received $40,000 in cash, and also certain notes, aggregating $60,000; that the chattel mortgage herein sought to be foreclosed is the same mortgage that was executed and delivered in pursuance of said agreement; and that the judgment in favor of Pick & Co., here sought to be made a superior lien to that of the chattel mortgage, was rendered upon said $60,000 in notes which were given in pursuance of said agreement. Under these circumstances we do not think that in a court of equity Pick & Co. is in any position to attack the validity of the chattel mortgage in question, or to obtain a superior lien over it as urged.

And we do not think that, under the facts and circumstances in evidence, there is any substantial merit in the further contention of counsel for Pick & Co. that the chattel mortgage should be considered void, as against the judgment lien of Pick & Co., for the reason that, although the bonds which have been assigned to Michael E. White state on their face that they are secured by a chattel mortgage (i. e., one purporting to be then in existence), as a matter of fact said mortgage was not then in existence but was thereafter executed, and said bonds were not restamped as being so secured.

The decree of the circuit court of March 21, 1930, appealed from, should be affirmed, and it is so ordered.

Affirmed.

Scanean, P. J., and Barnes, J., concur.


source: Caselaw Access Project

author: Mr. Justjce Boggs

license: Public Domain

text:
    Willis A. Martin, Trustee, Defendant in Error, v. Violet Mae Frank et al., Plaintiffs in Error.
    Gen. No. 8,153.

      Heard in this court at the May term, 1930.
    Opinion filed September 18, 1930.
    Rehearing denied January 6, 1931.
    E. A. Green and Butters & Butters, for plaintiffs in error.
    Hibbs & Pool, for defendant in error.
   Mr. Justjce Boggs

delivered the opinion of the court.

Defendant in error, hereinafter referred to as complainant, filed a hill in the circuit court of LaSalle county setting forth that plaintiffs in error Violet M. Frank and Charles A. Frank, her husband, hereinafter referred to as defendants, being indebted in the sum of $12,000, executed four promissory notes, two for $5,000 and two for $1,000 each, hearing interest from date at the rate of 6 per cent per annum, “payable to the order of said makers and by them indorsed in blank and delivered”; that to secure said notes said defendants conveyed to complainant as trustee some 140 acres of farm land in said county, subject to a trust deed dated July 8,1925, to the First Trust Company of Ottawa securing $12,500; that said trust deed provided, among other things, “that if default shall be made in the payment of said notes or either of them at maturity, or if there shall be a failure to comply with any and every condition of said mortgage deed, then the whole of the indebtedness secured thereby shall, at the option of the holder of said mortgage, become due and payable, and that in case of foreclosure your orator should be allowed all costs and expenses laid out at any time anterior to the entry of final decree in such suit.”

Said bill further alleges that the defendants defaulted in the payment of the interest of $720, falling due March 1, 1927, and that “the holders and owners of said interest or coupon notes have exercised their option, and have declared the whole indebtedness secured by said mortgage deed to become due and collectible at once by foreclosure. ’ ’

Said bill further alleges that said defendants defaulted in the payment of certain interest due the holder of said first mortgage, “and that said First Trust Company of Ottawa, Illinois, was about to file a bill to foreclose its said deed of trust, whereupon your orator, for and on behalf of the holders of the principal and interest or coupon notes secured by the mortgage deed to your orator, did thereupon pay to said First Trust Company of Ottawa, . . . the interest ... of $631.25; that the mortgage deed to your orator now stands as security for said sum of $631.25 so paid”; that there was due to the complainant an attorney’s fee of $699, being for 5 per cent on the amount due on principal and interest on said mortgage indebtedness, together with the amount paid as interest on said first mortgage, and the principal amount owing on said notes; that plaintiff in error, Thomas Coffey “is in possession under an alleged lease from Violet Mae Frank and Charles A. Frank, but that the interest of Coffey is subject to the lien of your orator; that defendants, Violet Mae Frank and Charles A. Frank are insolvent; that the premises in question are scant security for the indebtedness due your orator for and on behalf of the holders and owners of the notes secured by said mortgage”; prays for a foreclosure of said mortgage, the appointment of a receiver, etc.

The e defendants failed to answer said bill, were defaulted and a decree, pro confesso was entered against them. The court in its decree found substantially in accordance with the allegations of said bill as to the execution of said notes and trust deed, default in the payment of interest on the trust deed herein and on said first mortgage; the election of the holders and owners of the notes here involved to declare the whole sum due and payable and “that there is due to the complainant the total sum of $14,771.39”; that the defendants, Violet Mae Frank and Charles A. Frank, were each insolvent; that said premises were scant security for said indebtedness, and that a receiver should be appointed to take possession of said premises, etc.

■ On April 20, 1928, being one of the days of the March term, 1928, separate motions were entered by defendants Violet Mae Frank and by Thomas Coffey, to set aside said decree and for leave to answer. With said motions were presented the answers proposed to be filed by the respective defendants. On hearing, said motions were each denied. To reverse said decree, this writ of error is prosecuted.

One of the errors assigned raises the question as to whether the court erred in denying said motions. Said defendants were regularly served with process more than ten days prior to the first day of the January term, 1928, of said court. No showing was made by either of said defendants, excusing their failure to file answers. The court, therefore, did not err in said ruling.

The question is also raised as to whether the court erred in appointing said receiver. The lease under which Coffey claimed was executed subsequent to said trust deed. The bill charged that the makers of said notes were insolvent; that the security for said indebtedness was scant; that said trust deed was a second mortgage. While the lease under which Coffey was holding extended by its terms to March 1,1932, he took said lease subject to the rights of the beneficial owners of the indebtedness here sought to be collected by foreclosure. Upon a defeasance, the complainant as such trustee had the right, at the instance of the holders of said notes, to take possession of said premises and, on a bill to foreclose, the court was empowered to appoint a receiver, giving that receiver the right to take possession. Rohrer v. Deatherage, 336 Ill. 450-455. We, therefore, hold that the court did not err in appointing said receiver.

The most serious ground urged for a reversal of said decree is that the court erred in proceeding to a decree on a record which fails to disclose that all persons interested were made parties.

It is practically conceded that, unless it be held that complainant, prior to and at the time said bill was filed, was the beneficial owner of said notes, this point is well taken. Complainant insists that his ownership of said notes is shown by the evidence taken on the motion to set aside said decree and for leave to answer.

. The only testimony referring to said notes and their ownership is that of Eoscoe Lynn. On cross-examination, this witness testified:

“I am the cashier of the same bank that Mr. Martin was president of. Mr. Willis A. Martin owns the notes secured by this mortgage personally. He obtained them at least a year ago, some time before foreclosure proceedings were instituted. I do not know when it was that this party asked Mr. Martin to foreclose— before he got the notes or after.
“Q. Is it a fact that you or Mr. Martin, or anybody else in the bank, refused to make known who owned the notes 1
“A. No one ever asked me before who owned the notes.
“I was present when Mr. Martin bought the notes. I know he bought them, because there was money changed hands and he holds the notes in his possession. They were in his possession at least a year ago; maybe longer; maybe two years; at least that long, anyhow. I was in the bank at the time he purchased these notes from the former owner, I think there in the directors ’ room; something like that. I was in the bank and knew the deal was going on. I don’t know as I can say I participated in the transaction, but I knew it was going on — might have been in other apartment of the bank. I could hear the transaction. I could hear them talking in the other room.”

The certificate1 of evidence only purported to include the evidence taken on the motion to set aside the decree and for leave to answer. No certificate of evidence was preserved at the prior term when the decree was entered.

Said bill contains no allegation that complainant owned the notes in question, and neither does the decree contain any finding that he owned said notes. The plural instead of the singular is always used in referring to the owners of said notes. It would be a far-fetched conclusion to say that the record disclosed that all interested and necessary persons were made parties to said proceeding.

It is a well established principle in equity that those having the beneficial interest in the subject-matter and relief sought are the proper parties to sue, although they may not have the legal title or interest therein. Frye v. Bank of Illinois, 5 Gilm. 332-338; Moore v. School Trustees, 19 Ill. 83-86; Winkelman v. Kiser, 27 Ill. 21-22; Gordon v. Johnson, 186 Ill. 18-29.

The general rule is that in suits respecting trust property, brought either by or against the trustee, the trustee is a necessary party because he holds the legal interest. The beneficiary is a necessary party because he has the equitable and ultimate interest to be affected by the decree. Dubs v. Egli, 167 Ill. 514-521; Gordon v. Johnson, supra, 29.

In every suit in equity, all persons having equitable rights in the subject-matter in dispute, as well as persons having legal rights therein, should be made parties. Moore v. Munn, 69 Ill. 591; Gerard v. Bates, 124 Ill. 150; Story’s Ec. Pl., 207; Nolan v. Barnes, 268 Ill. 515-523.

Where the rights of parties not before the court are intimately connected with the matter in dispute, so that a filial decree cannot be made without materially affecting their interests, the objection may be taken at the hearing, or on appeal, or on error. Prentice v. Kimball, 19 Ill. 320-322; Knopf v. Chicago Real Estate Board, 173 Ill. 196-201; Gordon v. Johnson, supra, 30; Nolan v. Barnes, supra, 523.

Even if it be conceded that the testimony of Lynn was sufficient to show that complainant was the owner of said notes, still that proof does not go in support of the allegation of complainant’s bill. Neither by express allegation nor by implication is it charged that complainant was the owner of all or any of said notes. The decree based thereon does not find that complainant was the owner of all or any of said notes, so that it cannot be said that this testimony goes in support of said decree. The allegations and proofs must correspond. Leahy v. Nolan, 261 Ill. 219-221; Houlihan v. Morrissey, 270 Ill. 66-70; Fisher v. Burks, 274 Ill. 363-367. In the latter case, the court at page 367 says:

“But if it be assumed for the purposes of this case that the evidence tended to prove fraud, the relief here could not'be granted on that ground, as there are no allegations of fraud, or misrepresentation in the bill. It is a fundamental principle of law that a party must stand or fall by the material allegations of his bill. He cannot be permitted to state his case one way in his bill and make another and different case by his testimony. The allegations of the bill, the proof and the decree must correspond. One is not entitled to recover unless there are averments in the bill to support the evidence.” Citing Fish v. Cleland, 33 Ill. 238; Carmichael v. Reed, 45 Ill. 108; Stearns v. Glos, 235 Ill. 290; Wilson v. Wilson, 268 Ill. 270.

And in Houlihan v.-Morrissey, supra, the court at page 70 says:

“A complainant, to recover at all, must do so on the case made by the bill, and will not be permitted to state one case in the bill and make a different one by the proof. Even though the evidence may make a .meritorious case, if it is variant from the case made by the bill, the bill should be dismissed. (Roland v. Bowles, 21 Ill. 17; Stearns v. Glos, 235 Ill. 290.) A complainant must stand or fall by the case he makes in his bill. (Gage v. Curtis, 122 Ill. 520.)”

It is also significant that, neither by the allegations of his bill, nor by his oral testimony, has complainant himself stated that he was the beneficial owner of said notes, nor does the evidence disclose any authority from the owners of said notes to support his allegation that the funds to be derived therefrom should be paid to him for their use.

Under the foregoing authorities, it was necessary that the holders of the notes in question should have been made parties to said proceeding, as they are the real parties in interest. The defendants, notwithstanding they were defaulted in the lower court, under the foregoing authorities, have the right to raise the question of the lack of necessary parties in this court.

It is also contended by counsel for the defendants ¡¡.that the court erred in decreeing that the defendants should pay to the complainant for the use of the holders of said notes, the amount owing thereon, or that, on a sale of said premises, the proceeds of the sale should be paid to the complainant for the use of the holders of said notes.

Copies of said notes and trust deed were exhibits to said bill and made a part thereof. An examination of these documents discloses that complainant had no interest whatever in said indebtedness. He was the holder of the legal title, with the right to foreclose, should he be requested so to do by the holders of said notes. The allegation that complainant was entitled to such proceeds was a conclusion of the pleader, not based on any 'allegations of fact, and was therefore insufficient.

Said bill was also defective in failing to disclose the identity of the beneficial owners of said notes, and the decree based thereon is erroneous in failing to find who said owners were. The record also fails to disclose that said notes were produced and made a part of the record in said proceeding. This is necessary. Reavis v. Fielden, 18 Ill. 77-81; Lucus v. Harris, 20 Ill. 165-170; Moore v. Titman, 35 Ill. 310-314; Bowden v. Wilson, 71 Ill. 485-487.

On the motion to vacate said decree, the notes were not produced, nor was any evidence offered as to where said notes were or as to who was holding them, or as to whether they had been filed and made a part of the record. The defendants, as the makers of said notes, have the right to a record which affirmatively shows that their property is being taken in satisfaction thereof.

So far as this record is concerned, the property in question might be sold, and the proceeds turned over to complainant without said notes being satisfied. If it developed, as the pleadings here tend to show, that persons other than the complainant were the holders and owners of said notes, such persons would have the right to file a bill to foreclose, making said trustee a party defendant, and, in default of payment of said notes, obtain a sale of said premises in satisfaction thereof.

Counsel for complainant insist that the evidence discloses that he was the owner of said notes, and that it would be an idle proceeding to make him a party in his individual capacity. That would be true if the allegations of the bill were that he was such owner. In other words, if he, as trustee, had alleged that he was the beneficial owner and holder of said notes, it would have been sufficient, even though he were not made a party in his individual capacity. Complainant’s bill contained no such allegation, and was therefore insufficient.

For the reasons above set forth, the decree of the trial court will be affirmed as to the appointing of said receiver, otherwise said decree is reversed and the cause is remanded for further proceedings in harmony with this opinion.

Affirmed in part, reversed in part and remanded.


author: Mr. Presiding Justice Matchett

text:
    Seth Seiders, Appellee, v. Charles F. Henry, Appellant.
    Gen. No. 34,266.

      Heard in the first division of this court for the first district at the April term, 1930.
    Opinion filed December 22, 1930.
    Rehearing denied January 5, 1931.
    Alden, Latham & Young, for appellant; Hobart P. Young and Sidney F. Moody, of counsel.
    William L. Kelley and John W. Marshall, for appellee.
   Mr. Presiding Justice Matchett

delivered the opinion of the court.

This is an appeal by defendant from a judgment in the sum of $23,894.72 entered upon the finding of the court.

Plaintiff sued for the return of moneys to the amount of $20,000 paid by him under the terms of a written contract in and by which he agreed to purchase a bungalow in a co-operative apartment building and for damages sustained by him in connection therewith.

Plaintiff’s statement of claim avers that defendant failed to perform his part of the contract; that defendant agreed to return the money, which he failed to do, and that this money was obtained by false representations.

The affidavit of merits denies that defendant defaulted in the performance of the agreement; denies that he made any false representations, and asserts that, plaintiff was at fault in that, without just cause, he refused to perform the contract.

At the close of all the evidence a motion to find for defendant was denied. Propositions of law were submitted by defendant. A greater number of these were refused, but by the 9th proposition the court held, correctly, we think, “that where a party has advanced money, or done any other act in part performance of any agreement, and then refuses to proceed to carry out the other terms of the agreement, the other party being ready and willing to fulfil all the obligations imposed upon him by such agreement, he cannot recover back the money thus advanced, nor recover damages for any acts done by him in pursuance of said agreement.” Wheeler v. Mather, 56 Ill. 241; Bryson v. Crawford, 68 Ill. 362; Harlow v. Snow, 147 Ill. App. 369, and Hansbrough v. Peck, 5 Wall. 497, 18 L. Ed. 520, are a few of the cases which so hold. The finding of the court was, however, in favor of plaintiff as heretofore stated, and defendant contends that the finding and judgment are against the evidence and contrary to the law, and further that the court erred in the assessment of damages.

The agreement upon which the suit is based was made February 15, 1927, and was in the form of a writing signed by plaintiff, addressed to defendant and accepted by him. As the determination of the controversy depends upon the construction of this agreement we set it out verbatim:

“Proposition.
“Chas. F. Henry,
201 East Delaware Place,
Chicago, Illinois.
“I hereby agree to purchase from you the bungalow located on the roof of the eighteenth floor of the building known as 201 East Delaware, for the sum of Eighty-four Thousand ($84,000.00) dollars, payable as follows:
$30,000.00 on delivery of stock and 99-year lease and purchase agreement
20.000. 00 on or before May 15, 1927
20.000. 00 on or before August 15, 1927
14.000. 00 on or before November 15, 1927, together with 6 per cent interest on all unpaid balances.
“It is further understood and.agreed that you are to build me an additional maid’s room attached to and adjoining the present room for which I am to pay Five hundred ($500.00) Dollars in the event this shall cost more than Three Thousand ($3,000.00) Dollars; should the cost be less than Twenty-five Hundred Dollars ($2,500.00) I am to pay nothing.
“Assessment to be arranged by attorneys for both parties on square foot basis.
“It is further understood and agreed the bungalow is to be finished immediately, according to the original plans and specifications from which there will be no deviation except upon my consent.
“It is understood and agreed that you are to arrange my interest in the corporation, so that in the event of a complete sale of the building I am to receive the pro-rated share of the receipts as 840 compared to 8,200.
(Signed) Seth Seiders.
“Accepted
Chas. F. Henry
By C. J. Williams. ’ ’

The construction to be given to the terms of the contract of the parties will be clarified by a recital of certain facts and circumstances which were well known by both parties at the time of its execution, which, as already stated, was February 15, 1927.

Defendant Henry was at that time in Florida and plaintiff Seiders in Chicago. The negotiations for the sale of the bungalow were therefore conducted by defendant Henry through his agent, C. J. Williams.

The bungalow was located on the top of the building known as the Two-O-One East Delaware Place Building, a corporation with that name having been organized under the laws of the State of Illinois by defendant Henry. It had a capital stock of $820,000, consisting of 8,200 shares of a par value of $100. The corporation owned the land and the building, the latter of which consisted of 125 apartments. Defendant originally owned the land, but he transferred it to the corporation, receiving in payment therefor the entire capital stock. Through mortgages upon the land and upon the building to be erected, funds were secured to construct the building, and the equity in the property was appraised at the par value of the stock, namely, $820,000. Defendant held all the shares except two, which were held by a brother and sister respectively, who thus qualified as directors of the corporation and who, together with defendant, constituted the board of directors.

The plan of the organization of the corporation was to apportion the equity in the property among the apartments in proportion to the size and location of each, and this was brought about by allotting to each apartment its supposed equitable share of the entire capital stock of the corporation. A schedule showing such allotments was filed with the secretary of state. The operating expenses, taxes, etc., were provided for by means of a monthly assessment against each apartment based upon the number of shares of the stock allotted to it. This assessment had been estimated and fixed by resolution of the board of directors, who, as already stated, consisted of defendant and his brother and sister. This resolution provided that such assessment should be the sum of $1.27 per share each month. If the owner of an apartment held a large number of shares of stock his monthly assessment was therefore proportionately large, and if the number of shares held by an owner was small, the assessment he was required to pay was proportionately less. The bungalow had been originally intended to be owned and used by defendant Henry, and for the purpose of.making his assessment small only 130% shares of stock of the building corporation had been allotted to this bungalow. When plaintiff made his first payment on February 15,1927, he was informed by Williams, defendant’s agent, that only 130% shares of stock went with the bungalow. He was also told at that time that Mr. Williams did not believe that defendant would sell the bungalow for $84,000 if the assessment paid by the purchaser was to be made on the basis of only 130% shares of stock, since in that case the assessment would amount to only approximately $165 a month. On the other hand, if 840 shares of stock, the amount which normally and ordinarily would have been allotted to the bungalow, were delivered to plaintiff, his assessment upon the same basis as other apartments would amount to over $1,000 a month. The situation therefore was that defendant did not wish to sell the bungalow on the basis of an allotment of 130% shares of stock for the reason that this would make the assessment of plaintiff too small. On the other hand, plaim tiff did not wish to accept an allotment of 840 shares of stock because this would make his assessment too large. In order to meet this situation there was inserted in the contract the provision: “Assessment to be arranged by attorneys for both parties on square-foot basis.” The parties knew that an assessment on such basis would amount to about $675 a month. This plan, if unmodified, was, however, subject to the objection that in case the whole building should be sold or in case it would be destroyed by fire, with plaintiff holding only 130% shares of the stock of the corporation, his shares in the proceeds would be only in proportion to the amount of stock held by him, and as it was the desire of the parties that plaintiff should have an interest in the property in the ratio of 840 to 8,200, the last paragraph was inserted in the contract which provided: •

“It is understood and agreed that you are to arrange my interest in the corporation, so that in the event of a complete sale of the building,-1 am to receive the pro-rated share of the receipts as 840 compared to 8,200.”

The usual manner in which a conveyance of an interest in this building was accomplished was through two written agreements, copies of which are attached to plaintiff’s statement of claim. One of these is described as “an agreement of purchase of stock,” which in substance it is. The other is described as a “proprietary lease” which is for the term of 99 years. Both parties were familiar with the terms of these two written documents, and it was their intention that the transfer of the bungalow should be made by executing the same, supplemented by the arrangement of the attorneys as to the assessment and an arrangement by the vendor by which the interest of plaintiff in the corporation would be preserved in the proportion of 840 as compared to 8,200 when the property should be sold.

Defendant was in Florida on February 15, and his return to Chicago was not expected until March 1,1927. Defendant’s agent, Mr. Williams, however, kept in touch with defendant by telephone, telegrams and letters. A short time after the contract was signed plaintiff requested permission of the agent to go into possession of the bungalow, but since there was a balance of $10,000 due on the initial payment and the lease and stock purchase agreement had not as yet been executed, defendant did not give his consent.

Plaintiff, however, testifies that the agent gave him permission to go in, and the evidence shows that he did go in and lay down carpets, which were afterwards removed, for injury to which the court allowed damages. On the other hand, Williams, the agent, testified that he did not give his consent; that he told plaintiff he would get in touch with defendant to see if it would be all right but that plaintiff said he wanted to move in and take a chance that it would be all right with defendant ; that he, Williams, asked plaintiff to wait one more day, but that plaintiff called him the next day and said that he had ordered the wagons and was going to move in and was perfectly willing to take a chance that it was all right. Williams says, “I told him to come ahead if he wanted to take a chance; that I could not stop him.”

It is clear that the terms of the contract did not give plaintiff the right to enter the bungalow before the execution of the lease and of the agreement for the sale of the stock, and we think his testimony to the effect that he was granted permission to enter is improbable and not sustained by the evidence.

At this time only ten or twelve of the apartments had been sold and defendant was still the owner of' 7,000 shares of the stock.

A clear preponderance of the evidence indicates that after the contract was signed the assessment was arranged by the attorneys for the respective parties on a square foot basis and the amount definitely fixed at $G75 a month. Mr. Charash, who at that time acted as attorney for defendant, testifies that sometime in the middle of February, 1927, he met plaintiff by appointment and that Mr. Williams was also present; that plaintiff then said to him that as he understood it he was to pay $675 a month, and that he was paying on a different basis from the average tenant and asked the witness if that was not so, to which the witness responded that it was; that a few days thereafter the witness called upon plaintiff’s attorney, Mr. Marshall, who informed him that as far as the $675 assessment was concerned the same was agreeable to plaintiff. Defendant testifies that he met plaintiff on March 3, 1927, and that plaintiff at that time said that he would pay the $675 assessment per month. The evidence of these witnesses on this point is uncontradicted in the record, and the facts must therefore be regarded as established.

It is not contradicted (in fact it is established by the evidence of plaintiff) that on March 3, 1927, plaintiff refused to go ahead with the contract; that he said to defendant:

“I don’t like the looks of it. I don’t like the looks of the whole deal. I don’t like the looks of your letting me put carpet in and not letting me move in and I don’t like the way you are stalling around and I want my money back.”

Plaintiff gives as a further reason for refusing to carry out the contract his objection to defendant’s proposition that his interest in the whole building should be protected through the deposit by defendant of an additional number of shares, 710, in escrow in order to comply with the last clause of the contract. The controlling question in this case, we think, is whether the offer of defendant to deposit this stock in escrow with a trust company for the benefit of plaintiff, so that in the event of the sale of the building he would receive his share of the net receipts in proportion of 840 as compared to 8,200, was a compliance with the terms of the contract. The record shows that on March 14, defendant notified plaintiff that he was waiting for the $10,000 balance due on the initial payment in accordance with the terms of the agreement. The notice further stated:

“The stock certificates, the purchase agreement and proprietary lease on said bungalow are being held for you and same will be delivered as soon as I have yotir payment of $10,000 and execution of purchase agreement and proprietary lease by you, the same having been executed by me.
“I am in hopes that you will see fit to complete this transaction without any further delay.”

The contention of plaintiff is that under the terms of this contract he was entitled to receive 840 shares of stock absolutely on the bungalow purchase and that the agreement to place the additional shares to make a total of that amount in escrow for his benefit is not a compliance with the terms of the contract. If it had been the intention of the parties that there should have been a delivery of 840 shares absolutely, it is difficult, indeed, to understand the reason for the last paragraph of the contract. Plaintiff testifies that he demanded the delivery of 840 shares, the necessary effect of which would have been to impose an assessment in an amount which he, himself, says it was agreed that he should not pay. He makes no suggestion of any interpretation of the contract other than that he was to receive 840' shares of stock absolutely — a proposition inconsistent with his own testimony and, we think, with any fair construction of the language of this contract.

It is, however, urged that the proposal to escrow the 710 shares is inconsistent with the provision of the lease to the effect:

“The stock owned by leaseholders of the building is irrevocably and continuously pledged by the purchaser, to the owner, (The Corporation) as security for assessments, etc., from time to time levied by the Board of Directors.”

We do not regard this provision as requiring the physical pledge of the stock certificates to the corporation. Its only effect, as defendant suggests,' is to give the corporation a first lien on the stock for the payment of all obligations owing the corporation, and the principal obligation is, of course, the payment of the monthly'assessment. The lien in favor of the corporation would exist whether the stock was deposited in' escrow for plaintiff’s benefit or was held in possession absolutely by him. We think the terms of the contract between the parties must control, and it is utterly impossible ■ by any fair construction to hold that defendant was to deliver 840 shares of the stock absolutely to plaintiff.

We hold that the offer of defendant to place this stock in escrow conformed to the requirements of the contract; that upon this record it conclusively appears that plaintiff, and not defendant, was in default in performing the provisions of the contract; that the finding of the court is clearly against the preponderance of the evidence and contrary to the law; that the judgment should therefore be reversed with a finding of facts and a judgment of nil capiat in favor of defendant.

Reversed with a finding of facts and a judgment of nil capiat in favor of defendant.

McStjbelt and O ’Connor, JJ., concur.

Finding of facts: We find as facts that plaintiff and defendant entered into the written contract which appears in the evidence of this case as Plaintiff’s Exhibit No. 1; that defendant has at all times been willing and able to comply with all things that he agreed to perform under the terms and covenants of said contract; that plaintiff without cause refused to abide by and perform the agreements and covenants undertaken by him under the terms of said contract; that he is therefore not entitled to recover against defendant and that a judgment of nil capiat should be entered in this court in favor of defendant.


text:
    Bruno Mitchell and Amelia Mitchell, Defendants in Error, v. Boleslaw Wengelewski and Victoria Wengelewski, Plaintiffs in Error.
    Gen. No. 34,482.
    Heard in the first division of this court for the first district at the October term, 1930.
    Opinion filed December 22, 1930.
    Coburn, Kearney & Coburn, for plaintiffs in error; Marshall V. Kearney, of counsel.
    Joseph P. Hector, for defendants in error.
   Mr. Presiding Justice Matchett

delivered the opinion of the court.

This is a writ of error by defendants to reverse a decree which enjoined and restrained them from the installation of a tank or tanks for the storage, use, sale or distribution of inflammable materials upon certain premises in the City of Chicago owned by them and which commanded them to remove therefrom certain tanks and materials which had been placed thereon pending the litigation.

The premises in question are situated at the southeast corner of South Kedzie Avenue and Forty-third Street, and complainants are the owners of two adjoining lots. The bill is based on section 2279 of the Chicago Municipal Code of 1922, as amended, which in part provides:

“It shall be unlawful to install any tank or tanks for the storage of any of the liquids mentioned in Section 2277 in any lot or plot of ground without first obtaining the written consents of the property owners representing the majority of the total frontage in feet of any lot or plot of ground lying wholly or in part within lines 150 feet distant from and parallel to the boundaries of the lot or plot of ground upon which said tank or tanks is or are to be installed.”

The bill alleges that defendants presented to the authorities of the City of Chicago documents purporting to contain the written consents of the owners of the frontage; that they represented that the signatures therein were procured by the free and voluntary act of the owners; that thereby defendants secured from the departments of the city permits for the erection of the gas and oil filling station and for the installation of a tank or tanks; that defendants pretending to comply with the ordinance segregated a plot of ground 16 by 25 feet on the southeast corner of the lot on which the gas station was to be placed and construed the ordinance to mean that the required frontage was limited to an area lying wholly or in part within lines 150 feet distant from and parallel to this segregated part of said lot; that thereby they excluded the requisite consents of the owners of property fronting on South Kedzie Avenue, Archer Avenue and West Forty-third Street directly opposite said proposed filling station.

The bill alleges that the permits were procured fraudulently; that they would never have been issued by the city if the true facts had been disclosed, and that the city should be authorized and compelled to cancel and revoke the permits.

The bill further alleges that in order to properly operate such gas and oil filling station, driveways must be built leading therefrom to the streets adjacent ; that article 2 of chapter 72 of the Chicago Municipal Code of 1922 provides inter alia that no person, firm or corporation shall thereafter construct, build, establish or maintain driveways which depress or elevate the established grade of public sidewalks from, across and upon public sidewalks, without first obtaining an order or permit to do so from the city council; that defendants never obtained such permit.

It is further averred that West Forty-third Street and South Kedzie Avenue are used almost exclusively for residence purposes; that all of the properties are improved with homes, flat and apartment buildings, occupied by families, in which many children of tender years reside; that South Kedzie Avenue is zoned for business but many of the buildings are homes and contain apartments located above the stores; that the southeast corner of Forty-third Street and Kedzie Avenue is in a large populated district; that many children, as well as old people, pass the corner at all hours of the day and night; that a large part of the residents and property owners in and adjacent to this neighborhood are opposed to the erection and operation of such gas and oil filling station; that they made complaint to the respective departments of the City of Chicago and called attention to the misrepresentation and fraud practiced in the procurement .of written consents, repeatedly protested to the respective departments of the City of Chicago and requested defendants to desist from further proceeding with the erection of the gas and oil filling station, bnt that defendants have continued the erection thereof, although complainants have requested the Commissioner of Buildings and other department superintendents to exercise the powers granted to them to stop and prevent the erection of such station; that complainants fear that defendants will proceed and that these superintendents will refuse to interfere unless restrained by injunction.

The bill sets up that complainants live in a one-story frame home, the bedrooms of which are on the north .side thereof, adjacent to and connected with the site of the proposed gas and oil filling station; that the erection of the same at the proposed location will render their home untenantable and will endanger the lives of women and children necessarily passing the premises in going to and from the stores and the public schools which are in close proximity to the same; that the construction of the station will increase the fire risk, decrease the value of all property in the immediate neighborhood, and particularly that of complainants, and make the same almost unsalable; that the gas and fumes emitted from automobiles of customers coming upon the premises of the station for the purpose of purchasing gasoline, oil and other commodities, as well as noise made by the operation thereof, would make the home of complainants untenantable and impossible to rent, thereby causing irreparable damage; that this would result in damages not susceptible to exact computation, and that complainants have no adequate remedy at law.

The City of Chicago answered that it had no direct interest in the outcome of the litigation and asked the protection of the court, submitting itself to the jurisdiction thereof.

. The other defendants answered admitting the existence of the ordinance and asserting that they secured a permit giving them the right to proceed with their work, and that they received a majority of the genuine signatures of the owners of frontage required by the ordinance. They expressly deny that they have not complied with the ordinance; that they procured the consents by misrepresentation, fraud or otherwise, or that they excluded the requisite consent of the owners of property fronting South Kedzie Avenue and Forty-third Street, as was alleged in complainants’ bill.

The answer also in general denies the averments of the bill with reference to the vicinity of West Forty-third Street and South Kedzie Avenue; avers that the same is zoned for commercial purposes, and denies that the erection of the gas station rendered the home of complainants untenantable or endangered the lives of the residents.

The cause was heard by the chancellor in open court, and on December 24, 1929, a decree was entered finding that defendants had made application to the city for a permit or license; that they had not obtained and did not obtain the written consent of the property owners representing the majority of the total frontage in feet of any lot or plot of ground lying wholly or in part within the lines 150 feet distant from and parallel to the boundary of the lot or plot of ground in question; that in violation of the ordinance defendants had installed two tanks of the capacity of 500 gallons and had filled the same with gasoline; that defendants perpetrated a fraud in and about the procuring of the permit; that the equities of the cause were with complainants and an injunction was directed as herein-before set forth.

Defendants do not argue that any one of the findings of fact as stated in the decree is against the manifest preponderance of the evidence. They seem to rely on legal propositions. They assert that filling stations and gasoline tanks have become necessary to, city life and are not nuisances per se, citing Munie v. Millner, 245 Ill. App. 257, and Continental Illinois Bank & Trust Co. v. Standard Oil Co., 257 Ill. App. 425, both, of which cases so hold. They further contend that the owner of land who seeks to enjoin the installation on adjoining property of gas tanks in connection with a gasoline filling station can recover, if at all, only on the ground of special damage, and cite Nelson v. Milligan, 151 Ill. 462; City of Pana v. Central Washed Coal Co., 260 Ill. 111, and Continental lllmois Bank & Trust Co. v. Standard Oil Co., 257 Ill. App. 425, all of which sustain the proposition as stated.

These propositions of law are well settled and are not controverted, but the same are not controlling in this case for the reasons that the findings of the decree, which defendants do not controvert, are to the effect that the ordinance was not complied with in obtaining a majority of the frontage consents as provided and for the reason that the averments of the bill, as already recited, show that complainants claim special damage which was sustained by the proofs.

The ordinance in question was held to be valid in Standard Oil Co. v. Kamradt, 319 Ill. 51. In Hoyt v. McLaughlin, 250 Ill. 442, it was held that proof that the alleged nuisance would depreciate the rental value of complainants’ building and lower the class of tenants which he might be able to obtain was a sufficient showing to establish special damage as distinguished from public injury. In Dunne v. Rock Island County, 283 Ill. 628, the construction of a jail near a parochial school in violation of an ordinance was, enjoined. The cases are collected in a note to par. 28, 32 Corpus Juris 49.

Defendants cite Springer v. Walters, 139 Ill. 419, and Joseph v. Wieland Dairy Co., 297 Ill. 574, both of which hold that a private property holder may not interfere to enjoin an injury threatened to purely public rights. These cases are distinguishable in that here not only-public rights but private rights as well are threatened.

There is no error in the record and the decree is therefore affirmed.

Affirmed.

McSurely and O’Connor, JJ., concur.


text:
    Ray W. Johnson, Executor of the Last Will and Testament of Elizabeth M. Walker, Deceased, and Ray W. Johnson, Individually, Defendants in Error, v. Horace L. Brand, Plaintiff in Error.
    Gen. No. 34,498.

      Heard in the first division of this court for the first district at the October term, 1930.
    Opinion filed December 22, 1930.
    Chester D. Kern, for plaintiff in error.
    Cutting, Moore & Sidley, for defendants in error; Philip H. Schofield, of counsel.
   Mr. Presiding Justice Matchett

delivered the opinion of the court.

By this writ of error defendant Brand seeks to reverse a decree in equity granting relief as prayed in a bill filed by Elizabeth M. Walker, who died pending the suit and whose executor was thereupon substituted. The cause was heard upon exceptions to the report of a master, the exceptions were sustained and a decree ivas entered with special findings as to the facts.

The bill was filed November 5,1923, and in substance averred that on April 21, 1919, defendant Brand by indenture leased to complainant, Elizabeth M. Walker, certain premises in the city of Chicago for a term of three years beginning on May 1, 1919, and ending on April 30, 1922; that for the purpose of securing the payment of rent to defendant, complainant on the same day assigned and set over all her right, title and interest in certain real estate situated in Howell county, Missouri, as security for the performance of the covenants of the lease, defendant agreeing that upon the performance of such covenants he would release and surrender the rights thereby conveyed; that complainant had performed the covenants, paid the rent and ceased to occupy the premises, but that defendant refused to release the interest conveyed as security, claiming that complainant was indebted to him.

The bill also averred that in truth defendant was indebted to complainant for divers sums of money, which she expended in the years 1919 to 1921 in the payment of taxes on the demised premises to the treasurer of Cook county at the special instance and request of defendant, but which she was not in fact obligated to pay; that defendant refused to reimburse her therefor; that complainant offered to pay any sum found to be due and payable by her, and prayed that defendant might be decreed specifically to perform the agreement and to execute and deliver a full and complete release, and for general relief.

The answer of defendant admitted the execution of the lease and the agreement, but denied that complainant had faithfully performed the covenants of the lease; admitted that she ceased to occupy the premises and that he has refused to release to complainant the interest acquired as security under the agreement; denied that he refused to comply with the agreement but stated that complainant was still indebted to him. The answer further denied that defendant was indebted to complainant for money advanced in the years 1919 to 1921 for taxes, and admitted that he refused to reimburse complainant for the same.

Defendant further averred that in the drawing up of the lease “by mistake, error, and misprision of the scrivener, the word ‘Lessor’ was used in place of the word ‘Lessee,’ ” so that the said lease read that the Lessor agreed to pay the taxes on said premises, whereas in truth and in fact the agreement between this defendant and said complainant contemplated the payment by said complainant lessee of all taxes levied or imposed on said premises during the period of said lease, a,nd that the said agreement for the payment of taxes by said complainant was part of the consideration of said lease and the term thereby granted, and that “in pursuance of such agreement the said complainant did pay certain taxes upon said premises during the term of said lease, but that said complainant has failed and neglected to pay all the taxes due thereon during the term of said lease. ’ ’

It is also averred in the answer that defendant was obliged to commence an action in forcible detainer against complainant to obtain possession of the premises ; that the premises were turned over to defendant by complainant in a ruinous and dilapidated condition, although the lease provided that they should be delivered in as good order and repair as when received; that complainant agreed to pay all sums expended or incurred by defendant in enforcing the covenants of the lease, including reasonable solicitor’s fees, and that by reason of the proceedings in forcible detainer complainant became and was liable for the sum of $200 for attorney’s fees, $15 for stenographer’s fees, and $8 for court costs. Defendant further answered that he was ready and willing at any time to reconvey the premises held by him when the indebtedness due from complainant to defendant was fully paid.

The cause was referred to a master who took the evidence and reported ás to the making of the lease and of the agreement for security. The master found that Mrs. Walker, complainant, entered into possession of the premises and paid the general taxes for 1919 amounting to $674.77, the general taxes for 1920 amounting to $707.57, and the general taxes for 1921 amounting to $968.81; that on June 26, 1922, defendant brought a suit in forcible detainer against her to obtain possession of the demised premises and obtained judgment for possession and costs; that Mrs. Walker remained in possession until the last part of September, 1922, and then moved out, leaving the premises in bad condition; that she paid to defendant the $2,900 a year rent during the period from May 1, 1919, to April 30, 1922, and in addition, $800.

The master found that the word “lessor” instead of the word “lessee” was inserted in the lease by mistake in the clause relating to the payment of taxes; that Mrs. Walker was an intelligent woman and was not deceived in any way by Brand; that she agreed to pay the taxes on the demised premises and that she was not entitled to recover the same.

In the 20th paragraph of his report the Blaster found as a matter of law that Brand could avail himself of the defense that the word “lessor” was inserted in the lease bv mistake, on his answer without a cross-bill.

Although the master found that Mrs. Walker received the premises in good repair and left them in bad repair, he found that the evidence as to the amount of damage was little more than a guess and not specific enough on which to base a finding; that defendant was not entitled to recover any damages on that account; that the usual fee for Brand’s attorney in the forcible detainer suit was $100, that the court costs incurred were $3, and that Mrs. Walker was liable to defendant for $408.30 for rent, making a total sum of $511.30 due from complainant to defendant. The master recommended that a decree be entered that Brand release and reconvey the Missouri land to complainant upon the payment by her of that amount.

The decree entered by the court sustaining exceptions of complainant to the report of the master found that by the terms of the lease Brand promised and agreed to pay the general taxes levied against the demised premises for the years 1919, 1920 and 1921; that he failed to do this; that such taxes amounting to $2,351.15 were paid by Mrs. Walker at defendant’s request; that defendant has not reimbursed complainant or her executor for these payments; that there was a balance due to defendant Brand on account of the use and occupation of the premises, costs, attorney’s fees, and expenses of the forcible detainer suit amounting to $511.30 (the same as found by the master) and leaving a balance due to the estate of Elizabeth M. Walker of $1,839.85. It was adjudged and decreed that defendant pay that sum to the executor and deliver a deed conveying to Ray W. Johnson, the devisee named in the will of Mrs. Walker, the property conveyed under the security agreement.

Defendant contends that he could properly set up the mistake made in the lease by way of defense in his answer without filing a cross-bill; that the finding of facts as made by the master is prima facie correct; that the money paid by Mrs. Walker for taxes was paid voluntarily and could not be recovered and that in decreeing specific performance of defendant’s agreement to reconvey the property, defendant should not have been required to execute the deed without reimbursement for the amount found by the master to be due to defendant from complainant.

An examination of the evidence leaves us without any doubt whatever that it was the intention of the parties to the lease that Mrs. Walker should pay the taxes on the. premises, and that the word “lessor” instead of “lessee” appears in the paragraph with reference to the payment of taxes through a mistake of the scrivener-who wrote the lease. There are several facts which compel that conclusion. In the first place, defendant Brand was primarily obligated to pay the taxes on the premises. There would be no reason for inserting a clause to impose that obligation upon him, and it would be unusual and senseless to do so. In the second place, the fact that Mrs. Walker paid these taxes when requested to do so by Brand without any protest indicates that she was not wholly relying upon his word but that she complied with what she understood and knew was her obligation. In the third place, her predecessor lessee, a Miss Hill, pursuant to the provisions of her lease, had paid similar taxes on the premises. Mrs. Walker talked with Miss Hill before renting the premises, and when asked if Miss Hill had told her how much the lease called for, she replied that Miss Hill had told her what she (Miss Hill) was paying. In the fourth place, defendant’s •positive testimony to conversations with Mrs. Walker in which she admitted this liability is corroborated by the testimony of another witness, who at that time was acting as the attorney for defendant, while Mrs. Walker’s explanations and denials are altogether weak and evasive. We shall not discuss the testimony further than to say that as a result of our examination of it we have no doubt that the word “lessor” was written by mistake in the paragraph in question although the word “lessee” was intended by the parties.

It seems to have been the theory of the trial court (and complainant argues in. his brief here) that defendant was not entitled to offer evidence tending to establish this defense under his answer in the absence of a cross-bill having been filed, and complainant relies on Roby v. South Park Com’rs, 252 Ill. 575, and Daly v. Daly, 299 Ill. 268, as tending to sustain this contention. In considering this point, defendant undertakes to distinguish between the agreement entered into for the reconveyance of the land and the lease. They were, however, executed by the same parties, on the same day and concerned the same subject matter. It is undoubtedly the law, and these cases cited hold that as a general rule affirmative relief cannot be granted on a mere answer to a bill in equity and that the answer can be used only for purposes of defense. However, defendant here is not seeking affirmative relief. He seeks to defeat complainant’s bill by the interposition of his defense. He does not ask and the master does not recommend that the agreement and lease upon which complainant bases her suit shall be delivered up and cancelled or reformed. If such re- . lief were' sought complainant’s point would be well taken. In Story’s Equity Pleadings, 9th ed., sec. 391, p. 339, that author says:

“The latter'case (a cross-bill for relief) may occur, when the original bill is brought for the specific performance of a written contract, which the defendant at the same time insists ought to be delivered up or cancelled. Under the original bill no such relief could be had; and, even if the plaintiff should fail in obtaining a decree under his original bill for a specific performance of the contract, he might, notwithstanding, afterwards bring his action at law for damage sustained by him by the non-performance. It may, therefore, be necessary for the defendant, in order to his protection against any such harassing suits, to file a cross-bill for the purpose of having the contract delivered up or cancelled

In our opinion the question is settled in Ballance v. Underhill, 3 Scam. 453. That is a case in which complainant filed a bill in equity for the purpose of enforcing the specific performance of an award which had been made by arbitrators. Defendants filed an answer and for the purpose of defeating the relief sought, set up that there had been a mistake of fact made in the preparation of the award. The court said:

“It is perhaps hardly necessary to cite authorities to prove that courts of chancery have uniformly exercised the power of correcting mistakes, not only in simple contracts, but in bonds, deeds and other specialties, whether the application is made to the court merely for the purpose of rectifying the mistakes, so that the parties may assert their legal rights under the agreement, when corrected, or whether the application is made for the double purpose of rectifying the mistakes, and then enforcing a specific performance of the agreement; but also where the complainant seeks a specific performance of a contract, in which a mistake has occurred, and the defendant sets up the mistake by way of defence

The opinion in that case points out that in Gillespie v. Moon, 2 Johns. Oh. Eep. 585, where the right of a complainant to have a mistake in the description of a deed reformed upon oral testimony was questioned, Chancellor Kent decided in the affirmative after reviewing the cases and concluded that the mistake might be shown by parol proof and the relief granted to the injured party “whether he sets up the matter affirmatively by bill, or as a defence.” Chancellor Kent further stated that there were numerous instances in which the plaintiff had claimed and obtained relief by showing a mistake in the agreement and that there would be “a most deplorable failure of justice if the mistakes could only be shown and corrected when set up by-a defendant to rebut an equity.”

In the later case of Kisselbrock v. Livingston, 4 Johns. Ch. Kep. 145, in which a bill for the specific performance of an agreement was considered and a mistake was averred, Chancellor Kent stated:

“Indeed, by looking into the cases on this subject (and they are very abundant), it will be seen that the authority of the court to rectify a mistake in an agreement, and then enforce a specific performance of it in the same suit, was questioned long after it was settled,' beyond controversy, that a mistake might be set up to defeat the equity of the bill.”

We find nothing to the contrary in the cases cited by complainant. In Roby v. South Park Com’rs, supra, the court said:

“A cross-bill is a mode of defense. Where it is necessary for a defendant to have relief concerning the subject matter of the litigation different from that sought by the complainants, where it is necessary to the defense to obtain some discovery or where facts occurring subsequently to the filing of an answer are material to the defense, a cross-bill is the proper method of bringing these matters to the attention of the court. It is only where complete justice cannot be done on the original bill and answer that a cross-bill is proper. If the same matter is equally available by way of answer the cross-bill is unnecessary.”

In Daly v. Daly, already cited, our Supreme Court said:

“The rule is, that where a defendant relies on his answer, alone, he can only use the equity of his case for the purposes of defense, but if he wishes to become the assailant and seek affirmative relief with reference to the subject matter of the original bill he must file his cross-bill, and in this way, and this way alone, is he permitted to use his equity as a weapon of attack. (Puterbaugh’s Ch. Pl. & Pr. — 6th ed. — 370, 371; Hamalle v. Lebensberger, 267 Ill. 602.)”

Our conclusion is that the defendant here could show by way.of defense the mistake made in the execution of the lease without filing a cross-bill. Indeed it was not necessary to show that the mistake was mutual to sustain the defense. Krabbenhoft v. Gossau, 337 Ill. 396. It follows that the court erred in sustaining exceptions to the master’s report. The decree of the circuit court is therefore reversed and the cause is remanded with directions to approve the master’s report and to enter a decree in conformity with its recommendations.

Reversed and remanded with directions.

McSukely and O’Connor, JJ., concur.


author: Mr. Justice McSurely

text:
    Sherman & Ellis, Inc., Plaintiff in Error, v. The Journal of Commerce and Commercial Bulletin, Defendant in Error.
    Gen. No. 34,388.

      Heard in the first division of this court for the first district at the October term, 1930.
    Opinion filed December 22, 1930.
    Rehearing denied January 5, 1931.
    Knapp, Beye, Allen, Cochran & Cushing, for plaintiff in error; John B. Cochran and Leonard F. Martin, of counsel.
    Mater, Meter, Austrian & Platt, for defendant in error.
   Mr. Justice McSurely

delivered the opinion of the court.

By this writ of error plaintiff seeks the reversal of an order of the circuit court entered upon motion of the defendant expunging from the record certain orders, including a judgment against defendant for $300,000. The motion challenges an order reinstating the cause after it had been dismissed for want of prosecution.

Plaintiff brought suit in an action of trespass on the case, alleging that defendant had maliciously circulated false reports about plaintiff’s business. The record purports to show that on September 11, 1924, summons was served on an agent of defendant. November 21, 1924, an order was entered finding defendant in default for failure to appear. The next order was entered December 1, 1926, to the effect that the cause being called for trial and plaintiff failing to prosecute its suit, it was ordered that the same be dismissed for want of prosecution, and it was adjudged that plaintiff take nothing and the defendant go hence. The record next shows a motion filed January 25,1927, on. behalf of plaintiff, moving the court to vacate the order of December 1, 1926, dismissing the cause, and to reinstate it. This motion was supported by an affidavit asserting that at the time the order of December 1, 1926, dismissing the cause, was entered, there had been a prior order defaulting defendant and that the judge of the circuit court did not know that this default order had been entered, and that if he had known it he would not have entered the order of dismissal. The court, thereupon, on January 25, 1927, entered an order setting aside the prior order of dismissal and reciting that summons had been issued in July, 1924, and due process had upon the defendant corporation in October, 1924, and an order of default entered in November, 1924, and that*“through errors of fact not appearing on the record,” the cause was dismissed for want of prosecution.

Subsequently, on May 25,1927, an order was entered reciting that the cause had been reached for trial on the regular call of the calendar and pursuant to the rules of the court, and the plaintiff appearing by its attorneys and no one appearing for the defendant, it had been defaulted on November 26, 1924, and the court found upon oral and documentary evidence that the plaintiff had been damaged as alleged in its declaration and was entitled to recover damages to the amount of $300,000.

February 28, 1928, defendant filed its motion to expunge all orders subsequent to the order of December 1, 1926, dismissing the cause for want of prosecution, and that the judgment entered May 25, 1927, for $300,000, against defendant be vacated and set aside. This motion was supported by an affidavit to the effect that defendant had never been served with summons in this cause and that the person shown by the writ as having been served was never an officer, agent, employee or in any mamier whatsoever connected with defendant corporation and that none of the officers of said corporation knew that the suit was pending or judgment taken until December, 1927. Plaintiff filed a demurrer to this motion. May 12, 1928, an order was entered expunging all orders subsequent to the order of December 1, 1926, which was the order dismissing the cause for want of prosecution.

Plaintiff in his brief attacks this order of May 12, 1928, on the ground that it is not sufficient under, section 89 of the Practice Act, Cahill’s St. ch. 110, 89, to justify vacating the prior orders; that this motion is to correct errors of fact which, if the court had known, the judgment would not have been entered and that the errors complained of are errors at law which are not reached by the motion in the nature of a writ of error coram nobis. To this defendant replies that this motion is not in the nature of a writ of error coram nobis brought under section 89, but is a motion to expunge from the record a void judgment and that it is fundamental that the court may at any time expunge from the record such orders.

We are of the opinion that defendant’s position should be sustained. It has been repeatedly held that a court may at any time expunge from its record void orders or judgments. As a general rule, a court has no power to set aside its judgments at a subsequent term, but this is subject to a number of exceptions, independent of any authority conferred by section 89. One of these exceptions is that a court has power to vacate a judgment at any time after the expiration of the term at which it was rendered, where the court was without jurisdiction to enter such judgment. City of Chicago v. Nedeck, 202 Ill. 257; City of Olney v. Harvey & Boyd, 50 Ill. 453. In Zandstra v. Zandstra, 226 Ill. App. 293, the opinion contains rather an extensive discussion of this question with citation of numerous authorities; and while the instant point was not necessary to the decision of that case, the opinion clearly shows that the weight of authority supports the proposition that, where a court never acquired jurisdiction to enter the judgment, the lapse of time does not affect the right to make the motion to expunge. Among other supporting cases are Rybarczyk v. Weglarz, 204 Ill. App. 232; Keeler v. People, 160 Ill. 179; Clark v. Daniel Hayes Co., 215 Ill. App. 350; People v. Weinstein, 298 Ill. 264.

Did the court have jurisdiction of the defendant at the time it entered the order of January 25,1927, reinstating the cause after it had been dismissed for want of prosecution? The motion upon which this order was entered was concededly under section 89 of the Practice Act, Cahill’s St. ch. 110, If 89. This section provides, among other things, that errors of fact may be corrected by the court upon motion in writing “upon reasonable notice.” In Barnes v. Chicago City Ry. Co., 185 Ill. App. 148, it was held not only that the motion must be made in writing showing some meritorious right to be enforced, but that “the notice provided by that section is the process. The service of such notice gives jurisdiction of the parties.” This was followed in Wagener v. Western Electric Co., 213 Ill. App. 326. It is well settled by many decisions that the motion is the commencement of a new suit at law, in which new issues are made up, and that such suit is independent of the proceeding in which the order sought to be set aside was rendered and is an entirely different suit at law. Harris v. Chicago House Wrecking Co., 314 Ill. 500.

The record must contain the process by which the defendant is brought into court. Burke v. Chicago & N. W. R. Co., 108 Ill. App. 565; In the Matter of Estate of Martha Janett, 199 Ill. App. 13. The clerk certifies that the instant record is perfect and complete, and it fails to show that any notice was served on defendant of plaintiff’s motion on January 25, 1927, to reinstate the cause. In other words, the record fails to show service of process on the defendant, which was necessary to give the court jurisdiction.

Plaintiff argues that the recital in the judgment order of May 25, 1927, that the court had jurisdiction of the parties, is a sufficient recital to show jurisdiction. Where the record fails to show service of process or notice as required by statute, such error is not cured by a recital in the judgment that the court had jurisdiction of the parties. Law v. Grommes, 158 Ill. 492; Randall v. Songer, 16 Ill. 27; Oulvey v. Little, 233 Ill. App. 553 ; Hunsaker v. Watts, 257 Ill. App. 351; Forrest v. Fly, 218 Ill. 165; Dickinson v. Ridgely, 188 Ill. App. 252. In Morgan v. Campbell, 54 Ill. App. 242, where a similar motion was made, it was held that the only proof of notice of the application to reinstate the cause .were the words “predicated upon notice” contained in the order of reinstatement. These were held insufficient and that the record must show the court had jurisdiction of the party affected by the order, the opinion saying: “Jurisdiction having been once lost, and the term passed, the record must show that it was regained, and how, or the judgment has no basis.” Similar cases supporting this ruling are Smith v. Wilson, 26 Ill. 186; Brady v. Washington Ins. Co., 67 Ill. App. 159; Reynolds v. Anspach, 14 Ill. App. 38; Klaproth v. Greenberg, 169 Ill. App. 477. Furthermore, if the court had no jurisdiction to enter the order of January 25, 1927, reinstating the cause, recitals in that or in subsequent orders would be ineffectual and of no avail to give jurisdiction. A court does not acquire jurisdiction by a mere recital contrary to what is shown by the record.

Although it is unnecessary for us to pass upon the motion made to reinstate the cause, it should be mentioned that it set forth no matters which warranted the entry of the order of reinstatement. The only matter of fact set forth in the motion is that before the order of dismissal there had been entered an order finding defendant in default. This is not an error of fact to be cured by a motion under section 89 of the Practice Act. The court takes judicial notice of its records, and errors which may be corrected under this motion must not appear on the face of the record. Chapman v. North American Life Ins. Co., 292 Ill. 179; Hichman v. Ritchey Coal Co., 252 Ill. App. 560; Pisa v. Rezek, 206 Ill. 344.

For the reasons indicated we hold that the order of May 12, 1928, expunging the orders therein referred to was proper and it is therefore affirmed.

Affirmed.

Matchett, P. J., and O’Connor, J., concur.