author: Mr. Justice C’Connor

text:
    Ralph C. Sullivan, Executor of the Estate of Mary O’Neil, Deceased, Appellee, v. Arthur Culp, Appellant.
    Gen. No. 34,745.
    Heard in the first division of this court for the first district at the October term, 1930.
    Opinion filed March 2, 1931.
    G-. A. Buresh and David S. Horwich, for appellants.
    Kettles & Bidwill, for appellee.
   Mr. Justice C’Connor

delivered the opinion of the court.

Plaintiff brought an action of forcible detainer against the defendant to recover possession of' the first floor apartment and garage in the rear of the premises known, as 4417 West Monroe Street, Chicago. There was a trial before the court without a jury and a finding that the defendant unlawfully was withholding possession of the premises from the plaintiff, and the defendant appeals.

It appears from the record that Mary O’Neil became the owner of the premises on November 25,1924, by virtue of a warranty deed conveying the premises to her. The conveyance was made subject to certain incumbrances. Afterwards Mary O’Neil died testate and her will was admitted to probate in the probate court of Cook county, and plaintiff was appointed and duly qualified as executor of her estate. He filed his inventory scheduling the premises in question, .and on August 24, 1927, he entered into an agreement with the defendant whereby he agreed to sell, and defendant agreed to buy, the premises, and on that date plaintiff received $1,000 on account of the purchase price and executed and delivered to defendant the following receipt: “Aug. 24, 1927, Bec’d $1,000 of Arthur Culp in partial payment on premises known as 4417 Monroe Street, same to be sold in accordance with an order to be entered by the probate.court of Cook county, 111., purchase price to be $15,250. (Signed) Balph Sullivan.” About a week after defendant had paid the $1,000 as evidenced by the above receipt, he entered into possession of the property and has since continued to occupy it. Shortly after he went into possession he was advised by plaintiff that plaintiff could not give a clear title to the premises, apparently for the reason that one of the mortgagees had instituted foreclosure proceedings. The defendant then demanded the return of his $1,000 and the further sum of $1,600, claiming he had improved the property to that extent since taking possession of it. Both plaintiff and defendant were made defendants to the foreclosure proceeding and a decree was entered in the superior court of Cook county decreeing the foreclosure of the mortgage, finding an amount due on a junior mortgage, and also finding that there was $2,600 due the defendant, Culp, for the reasons above stated; and further decreeing that unless the money was paid the complainant in that case the property be sold; that if there was a sale the proceeds should be applied to pay the amount found due under the two mortgages, and then the $2,600 to the defendant, Culp.

It further appears that the property was sold in accordance with the decree, and at the time of the trial of the instant case the master’s certificate was held by the defendant, Culp, and he had been given credit for the $2,600 on the certificate. The decree finds that the two mortgages mentioned in the decree had been made and executed by Mary O’Neil, and that she had conveyed the premises by trust deed to secure the payment of indebtedness. There was a further finding that the mortgage being foreclosed was junior to a mortgage made on the property by Edward W. Jones and Mary, his wife, who were the grantors that conveyed the premises by warranty deed to Mary O’Neil. The decree further finds that Mary O’Neil died testate March 3, 1926, and that Ralph C. Sullivan, the plaintiff in this case, was appointed executor of her last will and testament by the probate court of Cook county; that Sullivan, as executor, in August, 1927, had agreed to sell the premises being foreclosed, to Arthur Culp, the defendant, for $15,250; that thereupon Culp paid Sullivan $1,000 and received the receipt above quoted; that shortly after the payment of the $1,000 by Culp, he went into possession and made repairs upon the property in the sum of $1,600; that thereafter, about the month of November or December, 1927, Culp was advised by Sullivan “that he could not clear the title to said premises and that the deal was off and that thereupon the said Culp demanded from said Sullivan the return of said $1,000 deposited, and the payment to him of said $1,600” and that Culp still remained in possession; and there was a finding that there was $2,600 due Culp and that it be paid to him out of the proceeds of the foreclosure sale if the proceeds were sufficient.

The last will and testament of Mary O’Neil, deceased, after making certain bequests, devised and bequeathed all the remainder of her estate both real and personal to certain parties. ’ The will then nominated Dr. Ralph C. Sullivan, plaintiff, as executor, and then provides, “I hereby empower, authorize and' give authority to said executor to convey, sell, lease, mortgage or otherwise dispose of my personal or real estate if-he deems it necessary, and to make and execute all' deeds, instruments and other papers which may be necessary in connection with any sale or conveyance, mortgage or lease on my property.” '

Counsel- for the defendant contends that plaintiff’s position is that he was entitled to maintain the action in question under and by virtue of the 5th paragraph of section 2 of the Forcible Detainer Act, Cahill’s St. ch. 57, Ü 2. That paragraph provides, “When a vendee, having obtained possession under a written or verbal agreement to purchase lands or tenements, and having failed to comply with his agreement, withholds possession thereof after demand in writing by the person entitled to such possession,” an action of forcible detainer will lie. We think it obvious, as counsel for the defendant contends, that the action cannot be maintained under the above provision of the statute, because the defendant did not fail to comply with the terms of the purchase of the property, but the failure to carry out the deal was occasioned by the fact that the plaintiff could not clear the title. We are. of the opinion, however, that the authority for the action is found in the second paragraph of section 2 of the Forcible Detainer Act. The act provides that an action for forcible detainer will lie “when a peaceable entry is made, and the possession unlawfully withheld. ’ ’

In the instant case, peaceable entry was made by the defendant and after he was advised that the deal could not be carried out, on account of the foreclosure suit, he demanded the return of his $1,000 and pay- ■ ment to him of $1,600 he had spent in improving the property. This demand in substance was complied with because he was given and received the $2,600 when the property was sold under foreclosure; having been paid the $2,600 and he having accepted it, he was not entitled under the circumstances to remain in possession afterwards. And plaintiff, being the owner of the equity of redemption of foreclosure, was entitled to possession. While there is some evidence in the record to the effect that plaintiff had made a demand for possession of the property before suit was filed, yet we think no demand was necessary because the statute gives the right to maintain the action and no mention is made in the statute requiring any demand; and under .the circumstances in this case we think it obvious that a demand would be unavailing because the defendant, on the trial and here, is contending that plaintiff has no right to possession.

Complaint is made to the attitude, conduct and language of the court,” but we think the complaint is entirely unwarranted. Defendant’s counsel throughout the trial were almost constantly objecting, and most of the objections were entirely without merit.

Under the terms of the will plaintiff was authorized to bring the action.

The judgment of the municipal court of Chicago is affirmed.

Affirmed.

Matchett, P. J., and McSttrely, J., concur.


source: Caselaw Access Project

author: Mr. Justice O’Connor

license: Public Domain

text:
    John Sexton and Company, Appellee, v. Grand Trunk Western Railway Company, Appellant.
    Gen. No. 34,803.
    Heard in the first division of this court for the first district at the December term, 1930.
    Opinion filed March 2, 1931.

      McCordic, Dent & Freeman, for appellant; Sidney K. Jackson and Roger D. Doten, of counsel
    J. V. DeLaney, for appellee.
   Mr. Justice O’Connor

delivered the opinion of the court.

Plaintiff had a judgment for $11,256.67 against the defendant. The basis of plaintiff’s claim is for damages claimed to have resulted through the failure of the defendant to transport seven cars of sugar from Port Huron, Michigan, to Chicago within á reasonable time, the damages being caused by a decline in the market price of sugar. The position of the defendant was and is that it was guilty of no negligence in transporting the sugar but that the delay was caused solely by what is designated as an “outlaw” strike of the switchmen in Chicago, which made it impossible to deliver the cars to plaintiff after they arrived in Chicago.

The record discloses that plaintiff is engaged in the wholesale grocery business in Chicago, and in May, 1920, purchased the seven carloads of sugar in question from Czarnikow-Rionda Company, the latter company having theretofore purchased the sugar from the Atlantic Sugar Refineries, Ltd., of St. John, IST. B., Canada. In accordance with instructions, the Atlantic Sugar Refineries, Ltd., in the early part of June, 1920, delivered to the Canadian Government Railways the seven cars of sugar to be transported from St. John to Chicago. The Canadian Government Railways issued its through bills of lading, one for each car, to the Sugar Refineries, Ltd., in which it was named as consignor, and Czarnikow-Rionda Co. as consignee, with instructions to notify plaintiff, John Sexton and Company, of Chicago.

There is no evidence, nor is there any contention, that there was any delay in transporting the sugar from St. John to Chicago. And from the evidence it is clear that neither the Canadian Government- Railways, over which the sugar was transported from St. John to Port Huron, Michigan, nor the defendant, Grand Trunk Western Railway Company, which brought the sugar from Port Huron to- Chicago, was in any way to blame for the switchmen’s strike in the Chicago district. The evidence also shows that the defendant railway company used its best efforts to deliver the sugar to plaintiff but that it was unable to do so on account of the strike.

Plaintiff’s contention is that it was the duty of the defendant railway company, when the cars were delivered to it at Port. Huron, Michigan, to notify plaintiff of the strike of the switchmen in the Chicago district and that it failed to perform this duty. Counsel for plaintiff in his brief says: “There was no attempt on the part of the defendant to prove that any notice was given to us, the plaintiff, as to a strike condition existing on its line. In fact, we feel it was agreed at the time of the trial, and we believe also in the stipulation that no notice was given of the existence of a strike, or any likelihood of delay caused by same.” In reply to this, counsel for the defendant say that the record does not disclose any such agreement and that there was no evidence tending to show that any such notice was or was not given to the plaintiff— that there is no evidence on this question. And each side contends that the burden was on the other to make such proof.

In the view we take of the case, we think it is unnecessary to pass on the question as to which side had the burden'of proof. Suffice it to say that plaintiff alleged in its declaration that it was the duty of the defendant to notify it at Port Huron, Michigan, when the cars were delivered to it there, of the fact that the strike of the switchmen might cause a delay.

The evidence further shows that shortly after the cars were received by plaintiff it filed its claims for damage to the sugar, which claims were paid; that the claim which is the basis of the judgment was not made until September 15, 1921, about 16 months after the delivery of the sugar to plaintiff. The bills of lading contain on the reverse side the following conditions: (1) that the carrier should not be liable for loss or damage or delay caused by strikes; and (2) that “Notice of loss, damage or delay must be made in writing to the Carrier at the point of delivery, or to the Carrier at the point of origin, within four months. . . . Unless notice is so given the Carrier shall not be liable.”

The consolidated freight classification filed by the defendant with the Interstate Commerce Commission of the United States and with the Board of Railway Commission of Canada provided: “Except where the loss, damage, or injury complained of is due to delay or damages while being loaded or unloaded, or damaged in transit by carelessness or negligence, as conditions precedent to recovery, claims must be made in writing to the originating or delivering carrier within six months after delivery of the property.”

Defendant contends that under the conditions above quoted from the bill of lading, there is no liability because the defendant did not file its claims within four months from the time the sugar was delivered to the plaintiff, but on the contrary did not file such claims until about 16 months after such delivery. We think this contention must be sustained. Section 20 of the Act to Regulate Commerce, in force in 1920 when the sugar in question was transported, required a common carrier receiving property for transportation in interstate commerce to issue a receipt or bill of lading therefor and makes it liable to the holder for any loss, damage or injury to such property and contains the following proviso: “Provided further. That it shall be unlawful for any such common carrier to provide by rule, contract, regulation, or otherwise a shorter period for giving notice of claims than ninety days and for the filing of claims for á shorter period than four months, and for the institution of suits than two years; Provided, however, That if the loss, damage or injury complained of was ' due to delay or damage while being loaded or unloaded, or damage in transit by carelessness or negligence, then no notice of claim nor filing of claim shall be required as a condition precedent to recovery.” Davis v. John L. Roper Lumber Co., 269 U. S. 158. In that case the court held, under the second proviso above quoted, “that ‘carelessness or negligence’ is an element in each case of loss, damage, or injury there named.” And that since there was no evidence showing carelessness or negligence on behalf of the transportation company, notice of loss or damage must be given within the time mentioned in the bill of lading; and unless this were done no recovery could be had. See also Chesapeake & O. Ry. Co. v. A. F. Thompson Mfg. Co., 270 U. S. 416; Barret v. Van Pelt, 268 U. S. 85. In the instant case there is no evidence of any carelessness or negligence on behalf of either of the two railroad companies in the transportation of the sugar. Nor do we think there is any merit in plaintiff’s contention that it was the duty of the defendant Railway Company to notify plaintiff of the fact that there was a switchmen’s strike in the Chicago district when the cars -were turned over to it at Port Huron, Michigan. And this is so even if we assume that no notice was given by the defendant Railway Company to plaintiff of the fact that there was a strike of the switchmen, for the reason that when the defendant received the cars at Port Huron, Michigan, they were then in transit from St. John to Chicago. In these circumstances, the defendant company ought not to be placed in the same position as though it were the initial carrier that received the goods from the consignor. There was certainly no obligation on the defendant Railway Company in .any view of the case, to notify plaintiff. Plaintiff was neither the consignor nor the consignee of the goods. If there was such obligation the notice should be given to the consignor. Eastern Ry. Co. v. Littlefield, 237 U. S. 140. So that in any view of the case there could be no obligation on the part of either of the two Railway Companies to notify plaintiff, as it alleged in its declaration. No notice having been given within four months, no recovery can be had. Moreover, there is no allegation in the pleadings, nolis there any evidence that plaintiff, who was conducting a wholesale grocery business in Chicago, where the strike was causing difficulty, did not know that the switchmen were on strike. Obviously, if the plaintiff knew of the switching difficulties in the Chicago district at the time in question, it would not have been benefited had the defendant Railway Company notified it of the strike.

A condition on the reverse side of the bill of lading, similar to the condition involved here in regard to notice of loss being given within four months, has been held valid both in Canada (Premier Lumber Co., Ltd. v. Grand Trunk Pac. R. R. Co. [Can.], 1 Western Weekly Reports [1923] 473; Grand Trunk Ry. Co. of Canada v. McMillian, 16 Supreme Court of Canada Reports, 543) and in this country (Georgia F. & A. Ry. Co. v. Blish Milling Co., 241 U. S. 190; Goldsmith v. Florida East Coast Railway Co., 217 Ill. App. 162.)

There is another reason why plaintiff cannot recover, and that is that all of the evidence shows that the defendant Railway Company was in no way negligent in transporting or delivering the sugar, the delay having been caused solely by the strike,

The judgment of the circuit court of Cook county is reversed with a finding of fact.

Judgment reversed with a finding of fact.

Hatchett, P. J., and HcSurely, J., concur.

Finding of fact: We find as a fact that plaintiff, having failed to give the defendant notice of its claimed loss within four months after the delivery of the sugar to plaintiff, no recovery can be had.

We also find as an ultimate fact that the defendant Railway Company was not negligent in transporting or delivering the sugar.


author: Mr. Presiding Justice Wilson

text:
    Allan S. Bowen, Appellee, v. Eugene Kraemer et al., Appellants.
    Gen. No. 34,379.

      Heard in the third division of this court for the first district at the June term, 1930.
    Opinion filed March 11, 1931.
    Rehearing denied March 25, 1931.
    William Slack, for appellants.
    Tolman, Sexton & Chandler and John T. Fitzgerald, for appellee.
   Mr. Presiding Justice Wilson

delivered the opinion of the court.

Complainant Allan S. Bowen filed his bill of complaint charging that Eugene Kraemer and Mary Kraemer, his wife, on March 21, 1918, were seized in fee simple of the West Half of Lot 5 and the East 38 feet of Lot 6, in Kimbark’s Addition to Hyde Park, Cook county, Illinois, known as 1353-57 East 53rd Street, Chicago, improved with a two-story frame residence and a three-story brick and stone apartment building; charges further that said Kraemer and wife conveyed said property on March 21, 1918, to complainant for $1,200 over and above the incumbrances on the property aggregating $11,000 by a quitclaim deed recorded March 23,1918; charges that at the time said conveyance was made complainant gave back to defendants an option in writing to purchase back said property within one year from February 1, 1918, for $1,200 with interest at 6 per cent, subject to incumbrances and to certain other charges specified ip. said option; charges further that complainant took possession of said property and has been in possession at all times since the giving of the conveyance; charges further that on November 12, 1918, defendants conveyed said property to John C. Wilson, as trustee, and that this deed was recorded November 22, 1918, and that said John C. Wilson conveyed to Rebecca Rosenheim by deed dated February 10, 1919; charges that said defendant Kraemer and his wife still assert title to said property, on the ground that said deed was, in fact, a mortgage, under which they would be entitled to make redemption; charges that such is not the fact and asks that the deeds now of record to John C. Wilson and Rebecca Rosenheim and the claims of the defendants be declared a cloud upon the title.

Defendants filed their joint and several answer November 25, 1922, admitting that Kraemer and his wife delivered a quitclaim deed to complainants, but deny that the option was signed as alleged and deny that any consideration was paid by Bowen and that the deed was intended as a mortgage. Defendants Kraemer and wife admit executing a deed to Wilson and admit the deed by Wilson to Rosenheim; they also admit that there was a deed signed by Rosenheim to Alice Marie Wagner, who appears as defendant. To this answer a replication was filed and, on March 21, 1923, cross complainants filed their cross-bill charging that the deed was, in fact, a mortgage and that the deed which was executed to Bowen was executed and delivered to Bowen for the use of Hoff, the owner and holder of the second mortgage on the property; charges that the conveyance was given as a mortgage for the purpose of providing additional security for Hoff, by reason of other advances for taxes, liens, insurance, repairs and other necessary expenditures that should be made by Hoff while in possession of the premises; charges further that Hoff agreed to account to Kraemer and his wife for all rents; that Hoff entered into possession and has always remained in possession and is collecting large sums of money as rent, for which he should account; prays that Hoff may be decreed to surrender possession of the premises and to account to cross complainant.

The answer of Bowen and Hoff to the cross-bill filed herein denies that the deed was a mortgage but admits that Bowen took title as trustee for Hoff on March 21, 1918, and that Hoff became the equitable owner subject to the right of Kraemers to purchase within one year from February 1, 1918.

John C. Wilson and Rebecca Rosenheim appear to have no further interest in the proceeding and the interest of Alice Marie Wagner, if any, arises by reason of a quitclaim deed from Rebecca Rosenheim, who, in turn, took from John C. Wilson, trustee. Alice Marie Wagner did not appear nor testify at the proceeding before the master. There is nothing in the record showing why Kraemer executed his deed to John C. Wilson and afterwards caused J ohn C. Wilson to convey to Rebecca'Rosenheim and caused Rebecca Rosenheim to convey to Alice Marie Wagner. No consideration appears to have been paid for said transfers and one of the points urged is that it was done for the purpose of clouding complainant’s title.

From the facts it appears that on and prior to March 21, 1918, Kraemer and his wife were seized in fee simple of said premises, together with the improvements consisting of a two-story frame dwelling and a three-story stone and brick apartment building; that in the year 1916, Charles W. Hoff, cross defendant, was engaged in the real estate business and undertook the management of the property in question for the defendants. At the time there was a first mortgage on said real estate in the sum of $10,500, in which Mead and Coe were the mortgagees. This mortgage was becoming due and Mead and Coe were refusing to renew it unless a substantial payment was made on the mortgage. In order to provide for this mortgage, Hoff undertook to make a loan to Kraemer for the sum of $1,000, and took as security a note for $1,000, dated August 11, 1916, due one year after date and secured by a second mortgage. From this time on, until March 21, 1918, Hoff managed the real estate for Kraemer and his wife and applied the income to the making of necessary expenditures and repairs, the payment of the instalments of interest due on the first mortgage up and until February 1, 1918, and taxes. The property had been sold during this period for the 1916 taxes and $517.88 was required to. redeem said property from the sale. The holders of the first mortgage were again threatening to foreclose and Kraemer and his wife were without funds to pay all or any part of the first or second mortgage or to redeem from said tax sale. On March 12, 1918, Hoff wrote a letter to Kraemer, in which he set forth in substance that unless some arrangement was made to take care of the taxes and the first mortgage interest, the first mortgagees would foreclose and that Kraemer must take some action to save his property and that the only way out was for- Kraemer to give him, Hoff, a deed to the property coupled with the right in Kraemer to redeem within a certain time. No reply was made to this letter, and on March 21, 1918, Kraemer and his wife executed the deed of conveyance to Hoff and took back an option to purchase said property for the sum of $1,200 with accrued interest, and the payment of general and special taxes. The master found that on the date of the execution of the deed in question, there was due from Kraemer and his wife the principal sum of the first mortgage, amounting to $10,500, the principal sum of the second mortgage, amounting to $1,000, and in addition thereto $1,755.55 for interest, tax redemption, advancement for repairs of the property and interest on the mortgages.

We are of the opinion from a reading of the testimony that on the date of the giving of this conveyance to the complainant, the property would not have sold for more than enough to pay the outstanding mortgages and obligations. The negotiations resulting in the deed of conveyance by the defendants to Bowen were conducted by a man by the name of Parker, since deceased, who at the time was in the employ of Hoff. Hoff, at this time, was engaged in the real estate business under the name of C. W. Hoff & Co. The cross-bill of the defendants charges that the quitclaim deed was made out to Bowen for the use of Hoff, so that it is safe to assume that the negotiations were conducted entirely for Hoff’s benefit. While the negotiations were on between Parker and the defendants, Kraemer telephoned Hoff, according to the testimony of the complainant, and stated that he was rearranging his business and if it were possible he would like to have the opportunity of buying the property back and asked for an option of one year. Complainant testified that he agreed to this and asked Kraemer to have Parker step to the telephone and he then dictated to Parker over the telephone the repurchase agreement which is in evidence. This option to repurchase was signed by Parker as agent for Hoff.

What appears to us to be the principal question involved is whether the parties intended the conveyance of March 21, 1918, to be a deed or a mortgage. Defendants raise several points aside from this main question which we will treat in their order:

First, it is urged that there is no evidence that complainant paid anything for the property nor that he is in possession. The obligation undertaken by Hoff to make repairs, which were not covered by the mortgages, to pay interest on the first mortgage, and to assume the accruing obligations under the first mortgage, coupled with the fact that a foreclosure proceeding would be expensive and that the property would not be able to pay anything, was a sufficient consideration in conjunction with the right granted to the defendants to repurchase within one year at a fixed price. There was no need to introduce evidence of possession because of the fact that the cross-bill of the defendants charged the complainant with being in possession and this was admitted by the answer to the cross-bill. Lott v. Davis, 264 Ill. 272.

Second, it is urged that there is no proof that Allan S. Bowen is in possession. The cross-bill charges that Bowen held for the use of Hoff and that Hoff was the equitable owner and in possession. The answer to the cross-bill admits it.

Third, it is charged that the decree gave affirmative relief to Charles W. Hoff, who is not a party thereto, and that there is a variance between the bill and the decree. Hoff was, however, a party to the cross-bill and his rights were duly adjudicated thereunder. A court of equity will take jurisdiction for all purposes and enter its decree in accordance with the facts found. Baker v. Salzenstein, 314 Ill. 226.

It is also insisted under points 9, 10,11 and 12 that:

(a) An agent cannot purchase the property of his principal for himself;

(b) That the option given to Kraemer was not enforceable because it was signed by Parker, as agent;

(c) That the pleadings of the complainant and the cross defendant are binding upon him; and

(d) That the master heard the witnesses and his finding has the force of a verdict by a jury.

As to (a) counsel cite 'and rely upon Conant v. Riseborough, 139 Ill. 383. In that case it was held that where an agent professes to act for others but in fact acts for himself, his acts inure to the benefit of his principal. This is not the fact in the case at bar. All the dealings between Hoff and Kraemer appear to ' have been between them as debtor and creditor. Moreover, at the time the deed was signed, according to the evidence, Kraemer telephoned Hoff in regard to the right to an option to repurchase, so that he knew Hoff was the real purchaser. All the dealings between the parties indicate that they were fully aware of the fact that each was acting in his own interest and behalf.

The position taken by the defendants under (b), that the option was not enforceable, is without weight in view of the fact that the agent signed under the express authority of the principal. The evidence is clear that Parker was authorized to sign for Hoff and under the facts in this case if Hoff had attempted to repudiate the optional contract, it is clear from his conversation over the telephone with Kraemer and his conduct thereafter, that he would he estopped from denying that agency.

Under (c) we are unable to agree with counsel that there were any admissions in the pleadings as to Hoff which would preclude him from asserting his position as owner of the premises.

Under the point (d), to the effect that the finding of the master had the force of a verdict of a jury, the Supreme Court of this State has held that such finding while prima facie correct, is in fact, of an advisory nature only and that the facts are open to consideration by both the trial court and the Appellate Court on review. Kelly v. Fahrney, 242 Ill. 240; Corbly v. Corby, 280 Ill. 278; Chechik v. Koletsky, 311 Ill. 433.

The controlling element in cases of this kind in this State appears to he the intention of the parties as to whether the instrument is a deed or a mortgage. The court in construing this question is not restricted to any particular kind of evidence, but those matters which tend to present the real intention and understanding of the parties and the true transaction may be considered. Totten v. Totten, 294 Ill. 70; Wallace v. Greenman, 321 Ill. 423.

It may be stated as a general rule that the evidence necessary to convert a deed, absolute on its face, into a mortgage must be clear and convincing. Kelly v. Lehmann, 297 Ill. 33; Council v. Bernard, 319 Ill. 392. On the other hand it is also a well settled rule that where the transaction is between a mortgagor and a mortgagee and the conveyance is by the mortgagor to the mortgagee, as a result of which the equity of redemption is lost and the entire estate vested in the mortgagee, the transaction will not be sustained in equity unless it is fair and free from oppression, fraud or undue influence. There is nothing that prevents a mortgagor from deeding the property to a mortgagee, providing the agreement is bona fide, fair and equitable, but a court will scrutinize such a transaction with care. Cassem v. Heustis, 201 Ill. 208. West v. Reed, 55 Ill. 242.

Authorities are cited by counsel for the defendants to the effect that where there is an existing indebtedness between the parties and a deed is given by the debtor to his creditor, there is a presumption that it is intended to cover the indebtedness and become a mortgage and that in such case where the indebtedness is not canceled or extinguished, it is strong evidence that the mortgage is merely an additional security. In the case at bar, however, the existing indebtedness was already evidenced by a mortgage of record. It is also insisted that under the authorities, the. retention of the note and mortgage after the giving of the deed in question was strong evidence that the deed was intended as a mortgage for the purpose only of covering additional expenses incurred by the second mortgagor in the protection of his mortgage and that the giving of the deed was an additional security. With these recognized rules of evidence in mind, together with the presumptions surrounding such a transaction, it becomes necessary to consider the evidence for the purpose of arriving at the intention of the parties. It should also be remembered that the decree of the chancellor should be given certain weight in the consideration of the'facts. Defendants; in support of their position that the deed was a mortgage, stress particularly the fact that the note, and mortgage securing it, were not canceled and are still subsisting liens against the property; that the letter of March 12, 1918, written shortly before the signing of the deed of conveyance, and in which Hoff asked the defendants to give him a quitclaim deed, contained a clause to the effect that the defendants would' have the right to redeem the property after the giving of the deed; that Hoff after the giving of the deed was in possession and collected the rents and kept account of the collections, together with disbursements and charged the account with commissions for collecting rents and this according to the theory of the defendants, was upon the supposition that he was acting as an agent for the defendant; that nothing was paid to Kraemer at the time of the execution of the deed and that about the 20th of November, 1918, Hoff gave a statement to Kraemer of the receipts and disbursements and that the accounts were carried in Kraemer’s name until about the time of the filing of the bill of complaint.

Complainant points out that the property at the time of the giving of the conveyance in question was not of sufficient value to pay under a sale the first mortgage of $10,500, together with the second mortgage of complainant’s and the taxes, liens and cost of repairs that had mounted against the property; that a sale under foreclosure in March, 1918, would- have resulted in a complete loss of the property and a probable deficiency; that complainant'kept the note and mortgage because in his opinion the option to repurchase had a year to run and in the event of a repurchase it might reattach for whatever it was worth; further that the defendants at no time demanded the note or mortgage or made any effort to obtain it although it was in the office of complainant in the City of Chicago at all times; that the statement was given to Kraemer in November, 1918, at his request, but not because of any right that Kraemer had to such a statement; moreover, that it was the only time from the date of the conveyance until the filing of the bill that Kraemer showed any interest in the property or made any inquiries as to cost or expense of its operation; that Hoff did not take any other or further obligation for moneys advanced by him to clear the property of its liens arising after the giving of the deed; that the consideration of $1,200 fixed in the option to repurchase was a certain fixed sum agreed upon by the parties; that the action of the defendants in waiting over a period of three years and until complainant himself filed his bill, indicates that the defendants considered that they had no further interest in the property and that it would be unfair for them to let the complainant carry the burden until there might be a future enhancement in the value of the property. (Carr v. Rising, 62 Ill. 14; Hancock v. Harper, 86 Ill. 445); that the account was carried by the complainant on the books of Hoff & Co. and a commission charged for the purpose of keeping the account separate and distinct from other transactions of the complainant; and that the commission was charged for the purpose of prorating the overhead expenses of the business among the various properties for which the complainant under the name of Hoff & Co. was collecting rents; that this was not done for the benefit of the defendants, but for the benefit of the-complainant as a proper bookkeeping arrangement; that there was no reason why the defendants or any of them, if they were of the opinion that they had a right or equity in the property, should not have started proceedings to foreclose, but that it became incumbent upon the complainant to start said suit several years after the date of the conveyance; that the deeds from the defendants to John C. Wilson and by him to the other parties to the suit clearly indicate they were for the purpose solely of clouding the title; that as a matter of fact, from the record, the defendants have no further interest in the property and have parted with their title; that the letter referring to the right to redeem, sent by Hoff to Kraemer prior to the signing of the deed, was improperly admitted in evidence, in view of the rule that prior communications are presumed to have been merged in the final instrument, and was not admissible to vary its terms.

This court is impressed particularly with the fact that from the year 1916, when complainant undertook to advance the money for the defendants for the payment of taxes and a reduction of the first mortgage, the complainant appears to have been more interested in the welfare and protection of the premises and the property than the defendants themselves. From that time on no money appears to have been advanced by the defendants for the protection of the property, but the collection of rents, payment of taxes, upkeep of the premises and the warding off of the foreclosure suit of Mead & Coe appears to have been carried on and conducted almost exclusively by the complainant.

A number of cases are cited by counsel in support of their position that the courts will construe a deed from a mortgagor to a mortgagee as a mortgage most strongly in favor of the mortgagor. Upon examination, these appear to be cases where possession was retained by the grantor, after the giving of the deed, or where improvements were made by the grantor after the conveyance, or there was the creation of a new debt, or an express provision for redemption, or terms in the deed showing it was intended as security for a loan, or gross disparity between the value of the property and the amount for which it was taken by the grantee, or where the relationship existing between the parties was fiduciary in its character. These elements are lacking in the case at bar and the parties dealt at arm’s length.

It appears to us from the facts that the complainant was anxious to preserve the investment already made by him in the property, and that the defendants had lost interest in its conservation. This fact is particularly borne out by reason of the failure of the defendants at any time within the period of over three years to exercise any acts or authority over the property or to evince any intention of claiming their rights as mortgagor.

For the reasons stated in this opinion, the decree of the circuit court is affirmed.

Decree affirmed.

Hebel and Friend, JJ., concur.


text:
    Hugo Funk et al., Appellants, v. Mid-City Trust & Savings Bank, Appellee.
    Gen. No. 34,399.

      Heard in the third division of this court for the first district at the June term, 1930.
    Opinion filed March 11, 1931.
    Depress, Buckingham, Jones & Hoppman, for appellants ; Wilpred M. Doherty and Robert E. Wright, of counsel.
    Gustav E. Beerly, for appellee; Dwight A. Pomeroy, of counsel.
   Mr. Presiding Justice Wilson

delivered the opinion of the court.

Plaintiffs, as trustees of South Park Lodge No. 488, I.O.O.F., filed their suit in replevin against the defendant Mid-City Trust & Savings Bank for the recovery of certain bonds, and upon the return of the writ unexecuted as to said property, filed certain counts in trover for their value. Before trial the declaration was amended so that it appears that the action was maintained for the use of Globe Indemnity Company, as subrogee. At the close of the evidence, the court directed a verdict in favor of the defendant and judgment was entered upon the verdict. From that judgment an appeal was perfected to this court.

From the facts it appears that one Nathan Meyer was treasurer of the South Park Lodge from 1923 to January, 1927. He purchased in 1923 from the defendant, Mid-City Trust & Savings Bank, certain bonds which are hereinafter referred to as the Novak bonds and on or about March 1, 1926, purchased from the Madison & Kedzie State Bank certain bonds known as the Aiding bonds. These bonds, which were the property of the lodge, were kept in a safety deposit box at the. Independence State Bank.

In December, 1926, one Leonard A. Cohan was elected treasurer to succeed Meyer, and took office on the first Friday in January following. Shortly thereafter the bonds were transferred from Meyer to the new treasurer Cohan and he, in turn, took possession of the lock box and its contents which included the bonds in question. About the middle of October, 1927, the officers of the Lodge discovered that Cohan, the treasurer, had misappropriated the bonds and had disappeared. Upon investigation it developed that both the-Novak and the Aiding bonds had been pledged by Cohan for his personal account with the defendant.

It appears that on July 22, 1927, Cohan borrowed $5,200 from the defendant bank and deposited the Novak and Aiding bonds as collateral security for the payment of his note. This note was renewed upon three different occasions, the last time on October 7, 1927. December 12, 1927, the defendant bank sold the Aiding bonds to the Madison & Kedzie State Bank and took over the Novak bonds in payment of the note of Cohan which he had failed to pay on maturity.

It is insisted on behalf of the plaintiffs that the bonds in question were not negotiable and that, therefore, the defendant acquired no title in view of the fact that they had been wrongfully pledged by Cohan, while acting as treasurer of the Lodge. The rule is well settled in this State that the indorsee or assignee of commercial paper who takes the same before maturity for a valuable consideration, without knowledge of any defects in the title and in good faith, will be protected.

The Supreme Court of this State in the case of Bradwell v. Pryor, 221 Ill. 602, says:

“The rule now is, that the indorsee or assignee of commercial paper who takes the same before maturity for a valuable consideration, without knowledge of any defects and in good faith, will be protected against the defenses of the maker, and mere suspicion of defect of title or the knowledge of circumstances calculated to excite suspicion in the mind of a prudent man, or even gross negligence on his part at the time of the transfer, will not defeat his title. In other words, the only thing which will defeat his title is bad faith on his part, and the burden of proof is upon the person assailing his right to establish that fact by a preponderance of the evidence. (Matson v. Alley, 141 Ill. 284; Bemis v. Horner, 165 id. 347; Merritt v. Boyden, 191 id. 136; Murray v. Beckwith, 81 id. 43; Shreeves v. Allen, 79 id. 553.) However harsh this rule may, on first impression, seem to be, it is based upon the policy of the law which gives full faith and credit to commercial paper transferred before maturity, so that it may circulate, as far as possible, with all the conveniences of currency.”

In the case of Drouineau v. First Nat. Bank, 244 Ill. App. 251, it appears from the facts that the husband of the plaintiff wrongfully hypothecated certain bonds belonging* to her and procured a loan from the defendant bank with the bonds of plaintiff as collateral security. The bonds in that case, as .-are the bonds in this case, were payable to bearer and it was there held that the bank in the absence of bad faith and actual knowledge had the right to be protected, and, that having dealt with the husband of the plaintiff in good faith, the bonds being negotiable and before maturity, it was entitled to retain them or their value as against the plaintiff. The court in its opinion says:

“It is familiar law that one in possession of chattels by theft can convey no title to an innocent purchaser. Coin and bank bills are excepted from the rule. And from the highest considerations of public policy, the law also excepts from the rule negotiable instruments acquired for value in good faith before maturity and without notice. It may be taken to be the well-settled rule of law that the transfer of stolen commercial paper, negotiable by delivery, to a bona fide purchaser, for value, without notice and before maturity, vests bim with a good title against all the world. The rule seems to be the same in the case of instruments that have been lost. 3 R. C. L. 1000; 8 C. J. 796; 9 C. J. 63; Jones v. Nellis, 41 Ill. 482.”

We are asked to hold the Novak and Aiding bonds in the case at bar as non-negotiable on the ground that they are not complete in themselves, in that they are expressly declared to be but a part of a contract embracing an entirely separate extrinsic agreement. It is insisted that on' the face of both the Aiding and Novak bonds, it appears that they are secured by a trust deed which is to be taken and considered together with them as part of the same contract and agreement. It is pointed out in the Aiding bonds that they are payable in the manner described by the trust deed; that the trust deed-contains an acceleration clause provid-ing that they may be redeemed in a certain manner and upon terms prescribed in the deed prior to the date of maturity; that in default in the payment of interest or any of the principal they may become due on or before maturity; that the mortgagor covenants to co-operate with the trustee to have said bonds qualified under the Blue Sky Laws, Cahill’s St. ch. 32, if 254 et seq.; that each bondholder agrees not to commence any proceeding except as provided for in said agreement; that the trustee in the trust deed shall have the right to waive, modify or amend any of the conditions of the covenants; that the trust deed contains a provision by which the mortgagor agrees to deposit with the trustee an amount equal to any federal income tax levied or assessed, dependent upon the amount of the so-called normal tax, but in no event in excess of 2 per cent.

Both the Novak and Aiding bonds are payable to bearer and are in form the usual, customary real estate bonds under which the mortgagors for value received, on a day certain, agree to pay an amount certain, together with interest on presentation. The Negotiable Instruments Act, Cahill’s Illinois Revised Statutes, 1929, ch. 98, If 21, provides that a negotiable instrument must be in writing and signed by the maker or drawer; must contain an unconditional promise or order to pay a certain sum of money; must be payable on demand or at a fixed or determinable future time and must be payable to the order of a specified person or to bearer. Section 23 of the same act provides that an unqualified order or promise to pay is unconditional within the meaning of this Act, though coupled with a statement of the transaction which gives rise to the instrument.

The bonds in question on their face contain all the requirements necessary in order to conform to the requisites of the statute in order to come within the ■meaning of a negotiable instrument under section 21 of the Negotiable Instruments Act. The same act provides that such an instrument is negotiable, even though coupled with a statement of the transaction giving rise to the instrument. The trust deed referred to on the face of the bonds in question is a statement of the transaction, as a result of which the bonds were issued. There is nothing in the trust deeds that provide for nonpayment, but they do prescribe the terms, under which their collection may be enforced in the event of a default. National Bond & Inv. Co. v. Lanners, 253 Ill. App. 262; Doyle v. Considine, 195 Ill. App. 311; Enoch v. Brandon, 249 N. Y. 263; Continental Guaranty Corp. v. People’s Bus Line, Inc., 31 Del. 595, 117 Atl. 275.

An examination of the trust deed securing the bonds, discloses that the terms of the trust" deed are with reference to the acceleration of principal and interest and the rights of the "bondholders with reference to foreclosing prior to maturity and other terms and conditions with reference to what can be done by the bondholders and the trustee of the trust deed in the event of a default or with reference to the safety of the bondholders. There is nothing in the terms that could be in any manner construed as a waiver by the bondholder of the right to enforce collection of the obligation which he holds. In the event the terms and conditions of the mortgage are lived up to and the interest paid, the bondholder by the express terms of his bond is entitled only to interest until the bond reaches maturity. There is nothing, however, to prevent his collecting the full amount from the makers of the bond, either upon the instrument itself or by enforcement of the trust deed. Enoch v. Brandon, 249 N. Y. 263.

We have examined the evidence with reference to the question as to whether or not the defendant took the bonds with notice, and are of the opinion that the evidence was insufficient to charge the defendant with knowledge of the fact that the bonds were not in fact the property of Cohan at the time they were deposited as collateral security by him. Some stress is laid upon the fact that the Nbvak bonds were purchased from the defendant by Meyers, treasurer of the plaintiff lodge, but these bonds were of a series of bonds and the transaction took place some time prior to the time they were presented by Cohan. There is nothing in this fact which would place the bank on actual notice. The probability of notice by the bank, or a mere suspicion, is not sufficient. Drouineau v. First Nat. Bank, 244 Ill. App. 251; Bradwell v. Pryor, 221 Ill. 602.

In our opinion the bonds in question were negotiable, and there is nothing to show that the defendant took them other than in the due course of business and without notice.

For the reasons stated in this opinion the judgment of the circuit court is affirmed.

Judgment affirmed.

IIebel and Friend, JJ., concur.


author: Mb. Presiding Justice Wilson

text:
    General Motors Acceptance Corporation, Appellant, v. A. H. Goldboges et al., Appellees.
    Gen. No. 34,454.

      Heard in the third division of this court for the first district at the June term, 1930.
    Opinion filed March 11, 1931.
    Goldman, Allshouse & Healy, for appellant; Egbert G. Dreffein, of counsel.
    No appearance for appellees.
   Mb. Presiding Justice Wilson

delivered the opinion of the court.

Plaintiff, General Motors Acceptance Corporation, brought this action in replevin against A. H. Goldboges, Atlantic Construction Co., George Brumlick, trading as Builders’ Building Garage, and John Doe, for the recovery of a Chevrolet truck, which the plaintiff claimed as the assignee of the vendor under a conditional sales contract. The suit was subsequently dismissed as to all the defendants excepting George Brumlick, trading as Builders ’ Building Garage, whose . claim to possession of the automobile was based upon his claim for a lien under the Garage Men’s Lien Act.

Under a stipulation of the facts, it is admitted that the plaintiff was the assignee of the vendor under a conditional sales contract; that the vendee kept the Chevrolet truck in question in the garage of the defendant Brumlick; that there was a bill in favor of Brumlick for storage and repairs made on the car at the request of the vendee. The cause was submitted to the court and resulted in a finding in favor of the defendant and judgment on the finding, from which judgment this appeal has been taken.

The conditional sales contract provides that:

First: Title to the property shall not pass to the purchaser until the purchase price has been fully paid;

Second: Assignment of the contract should not release the purchaser from his obligation hereunder;

Third: In the event of default in payment, the full amount shall become due and payable and the vendor have the right to repossess;

Fourth: The purchaser shall keep said property free from all taxes, liens and incumbrances and shall not transfer any interest in the contract or the property.

The Lien Act under which defendant claims is found in Cahill’s Illinois Revised Statutes of 1929, chapter 82, If 45, and is entitled, “An Act for the. better protection of any person, firm or corporation expending labor, skill or materials upon, or furnishing storage for, any chattel, creating a lien upon such chattel, and providing for the enforcement of such lien.” This Act provides for a lien for such services and storage charges as had accrued to the defendant in this case by reason of work and labor on the Chevrolet truck and storage for the same. Said Lien Act also contains a provision that it is created in connection with and in addition to any common law lien in favor of the defendant.

The sole question involved is as to whether or not a garage man in this State shall have a lien superior to the right of a vendor under a conditional sales contract.

The Uniform Sales Act, Cahill’s St. ch. 121a, Tiff 23 and 26, which was approved June 29,1915, and in force July 1, 1915, provides that a vendor may sell with a reservation that the right of possession is in himself until certain conditions have been fulfilled, notwithstanding the delivery of the goods to the vendee and that any one purchasing said property from the vendee shall acquire no better title to the goods than the vendee had “unless the owner of the goods is by his conduct precluded from denying the seller’s (vendee’s) authority to sell.” Prior to the adoption of this Act in this State, it had been consistently held,. contrary to the general weight of authority, that a delivery of personal property to the purchaser under a contract of conditional sale, with a retention of title in the seller, amounted to a constructive fraud. Under this rule it was held that one who dealt with the vendee, under a conditional sales contract without notice, acquired rights superior to those of the vendor. This was based upon the principle that possession indicated ownership and the vendor under a conditional contract, who clothed another with such indicia of ownership, was estopped to assert his claim against those who dealt with such a vendee. The rights of a vendor under such a conditional sales contract under ' the Uniform Sales Act, Cahill’s St. ch. 121a, 1f!f 23 and 26, as against a subsequent purchaser from the vendee, were passed upon in the case of Sherer-Gillett Co. v. Long, 318 Ill. 432. It was there held that such a sale was valid and the owner could repossess himself of the property, unless precluded by his conduct. It was stated in said opinion that, under the Uniform Sales Act, clothing another with the indicia of ownership, did not amount to constructive fraud, which had been the rule previously in effect in Illinois. The court in its opinion says:

“Owners of chattels must frequently entrust others with their possession, and the affairs of men could not he conducted unless they could do so with safety, so long as the possession of the chattel ■ is not accompanied by some indicium of ownership or the right to sell. (Drain v. LaGrange State Bank, supra.) Whether the legislature should adopt the companion act, which provides for the recording of contracts of conditional sale, is not for this court to decide. The Uniform Sales Act recognizes the validity of such contracts and specifically provides that no title can be passed by the purchaser of goods under such a contract 'unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell,’ ”

There is nothing in the case before ns which shows conduct on the part of - the vendor under the conditional sales contract which would amount to such fraud as to deprive him of his rights under such sales contract. The Lien Act under which defendant claims, Cahill’s St. ch. 82, If 45, provides for a lien for labor and material furnished on any chattel, ‘ ‘ at the request of its owner, reputed owner, or authorized agent of the owner, or lawful possessor thereof.” It was insisted at the trial that, under this provision, defendant had a lien because the work was done and the material furnished at the request of one who was the “lawful possessor thereof.” The plaintiff insisted that under section II, Article 2 of the Constitution of Illinois of 1870, the legislature has not the power to destroy vested property rights. City of Chicago v. Wells, 236 Ill. 129 ; Millett v. People, 117 Ill. 294; Rittenhouse & Embree Co. v. Warren Const. Co., 264 Ill. 619; Kelly v. Johnson, 251 Ill. 135. In the latter case it was held that the lien of a subcontractor could exist only by virtue of the original contract and that, if the original contract provided that the work should be done by the original contractor free and clear of liens, a subcontractor would have no right to a lien under the Mechanic’s Lien Act. The conditional sales contract in question provides that the vendee should keep the Chevrolet truck free and clear of all liens or incumbrances. This right of contract between the conditional sales vendor and vendee, it is insisted, is a vested right and the vendor could not be deprived of it by the Lien Act invoked by the defendant. To the same effect see Rittenhouse & Embree Co. v. Warren Const. Co., 264 Ill. 619.

The Supreme Court of this State had occasion to pass upon the question with reference to the right of a garage keeper to a lien as against the rights of a mortgagee under a chattel mortgage. It is true that in this case the chattel mortgage was recorded, bnt the court in a very strong opinion held that such was not the law. In its opinion it discussed at length the injury that might be done to the mortgagee by reason of extensive repairs made upon the chattel, which would practically defeat by their cost the equity which the mortgagee might have in the chattel. The same argument could be advanced in the case at bar. The vendee to the conditional sales contract might run up such a bill of expense that the vendor would be unable to repossess himself of the car, except at a prohibitive cost. The Supreme Court of this State in the case of Ehrlich v. Chapple, 311 Ill. 467, says:

“It is urged in this case that commercial necessity requires that the artisan’s lien be preserved, and that where the mortgaged chattel is retained by the mortgagor, to be used in the course of the mortgagor’s business, an artisan’s lien should, in the nature of things, be considered prior to the mortgage. What constitutes commercial necessity is by no means easy of determination. By reason of the facility with which chattels of the character involved here can be moved, the chattel mortgage has become a very important feature of the automobile business. Large sums of money are invested in the manufacture and sale of automobiles and in the matter of loans upon them, and in the automobile business. Banks and automobile industries depend upon the chattel mortgage as a security in the sale of automobiles. It would be difficult to say that the purpose for which a car is used is more of a commercial necessity than the means of its production or the protection of mortgage liens. We know of no doctrine in the law which will countenance any necessity, commercial or otherwise, that would destroy the vested interest of a prior lien. The purpose of a mortgage is to furnish security while the mortgaged property is to be left with the mortgagor for his. convenience. It is of the basis of a contract of this character that nothing should be done or permitted by the mortgagor to impair the security, other than that which arises out of ordinary wear and tear. Courts should not, therefore, indulge in the presumption that an agreement existed between the mortgagee and the mortgagor that the mortgage lien should give way to a subsequent artisan’s lien, but such should be shown by clear and cogent evidence.”

There are a number of cases in the reports in other States upon this question and the courts have differed .in regard to the rights arising under similar circumstances. The Supreme Court of Maryland in the case" of Meyers v. Neeley & Ensor Auto Co., 143 Md. 107, held that the automobile repairman had a lien for services rendered as against the conditional sales vendor.

The Supreme Court of Utah in the case of Cache Auto Co. v. Central Garage, 63 Utah 10, 30 A. L. R. 1217, held that no such lien could attach as against the conditional sales vendor. In this case, however, it appears that the decision was based upon the construction of the Garage Men’s Lien Act, and that a garage man’s lien should attach as against the owner only.

In Indiana it has been held that the lien would not attach as against the conditional vendor unless repairs were made by and with his consent. Atlas Securities Co. v. Grove, 79 Ind. App. 144; Madison Remedial Loan Ass’n v. Wells, 79 Ind. App. 266.

The Appellate Court in and for the Third District of this State in the case of Standard Motors Securities Corp. v. Yates Co., 257 Ill. App. 394, had occasion in a long and well considered opinion, to pass upon this question under circumstances practically identical. The court in its opinion says:

“If the act creating the lien could not be construed to extend to a machine covered by a chattel mortgage, the possession of which by contract is in the mortgagor until default, neither can it by construction be carried to a machine subject to a conditional sales contract, in which the legal title and the vested right of ownership is in the seller, and of which vested right he cannot be deprived except by due process of law.

“Some argument is made that the rule is against the best public policy of the State. This question is not before us, and if it were it need only to be suggested that no mechanic is called upon to work upon machines owned by others or without his pay, if he will use suitable diligence in that behalf.”

We are of the opinion that under the authorities cited, the conditional vendor had a right to retain possession in himself as to the chattel sold and further had the right to contract with the vendee that no liens or incumbrances should become effective as against the property under any act done by the conditional vendee. It may be for the best interests of all concerned that the law should require the filing of the conditional sales contract as a matter of record, but this is a matter for the consideration of the legislature and not the court. Hardships may arise by reason of the rule, but the right to contract as between parties is too well recognized as the law of this State. There was nothing in the ease at bar from which it could be gathered that the conditional vendor was estopped by his con-' duct, as the transaction was one which occurs daily in the regular course of commercial transactions between people of this State.

We have not been aided in our consideration of this cause by any briefs or suggestions filed on behalf of the defendant. We are not asked to reverse and remand the cause for assessment of damages, but only to find issues for the plaintiff.

We are of the opinion that for the reasons stated, the judgment of the circuit court should be and it is reversed and, there being no dispute as to the facts, the facts having been agreed upon, judgment is entered here finding property in the plaintiff.

Judgment reversed and judgment here.

Hebel and Friend, JJ., concur.


text:
    Anthony M. Fox et al., Plaintiffs in Error, v. Canadian Pacific Railway Company, Defendant in Error.
    Gen. No. 34,500.
    Heard in the third division of this court for the first district at the October term, 1930.
    Opinion filed March 11, 1931.

      J. Y. De Laney, for plaintiffs in error.
    Winston, Strawn & Shaw, for defendant in error; Frank H. Towner and Fred J. McManus, of counsel.
   Mr. Presiding Justice Wilson

delivered the opinion of the court.

This was an action in assumpsit brought by Anthony M. Fox, trading as Peter Fox Sons Company, against the Canadian Pacific Bailway Company, a corporation. A jury was waived and the cause tried by the court resulting in a finding in favor of the defendant and judgment entered on the finding. From this judgment an appeal was taken to this court.

From the facts it appears that certain dressed turkeys were delivered to the defendant at Saskatoon, Canada, December 12, 1922, for transportation by the defendant, and certain connecting carriers, to the City of New York. The defendant corporation owns certain lines in the United States, but none of these was used for the purpose of transportation of the shipment in question. On December 20, 1922, the shipment of turkeys was delivered at Aberdeen, Canada, by the Canadian Pacific Bailway Company, the initial carrier, to the Toronto, Hamilton & Buffalo Bailroad, the next carrier on the line of transportation to New York. It later came into the hands of the Delaware, Lackawanna & Western Bailroad, which transported the same from Black Bock in the United States to New York City. The turkeys were intended for the Christmas trade, but arrived late on the 23rd of December, 1922, and, as December 24th was Sunday, they were sold after Christmas and it is claimed at a greatly reduced price.

The following stipulation of facts was entered into between the parties at the trial: that the parties executed a contract covering the transportation of such shipment approved by the Board of Bailroad Commissioners of Canada; that no part of the loss, damage or delay occurred while the shipment was in the possession of the defendant; that all of the service performed on said shipment by said defendant was performed within the Dominion of Canada; and that the laws, statutes and decisions of Canada might be referred to with the same force and effect as if those said laws had been properly proven by competent testimony.

Proof was made as to the market value of the shipment in New York. The contract of carriage issued by the defendant company, among the conditions on the back, provides:

“The amount of any loss or damage for which any carrier is liable shall be computed on the basis of the value of the goods at the place and time of shipment under this bill of lading . . . whether or not such loss or damage occurs from negligence.” By the stipulation of the parties, it is agreed that no part of the loss, damage or delay occurred while the shipment was in the possession of the defendant.

Plaintiff in error insists that the contract of carriage was an agreement for transportation from Saskatoon, Canada to New York City, and further that even though it were not considered a through shipment, nevertheless, the defendant was liable as an initial carrier under the Interstate Commerce Act of the United States and particularly under sections 1 to 20 inclusive of this act. Section 20 provides:

“Any common carrier, railroad or transportation company subject to the provisions of this act, receiving property for transportation . . . from any point in the United States to a point in an adjacent foreign country, shall issue a receipt or bill of lading and shall be liable to the lawful holder thereof, for any loss, damage or injury to such property caused by it or by any common carrier, railroad or transportation company to which said property may be delivered or over whose line or lines such property may pass within the United States or within an adjacent foreign country . . . and no contract, receipt, rule, regulation or other limitation of any character whatsoever, shall exempt such common carrier, railroad or transportation company from liability hereby imposed.”

In support of the position of plaintiff in error, we are referred to the case of Galveston, Harrisburg & San Antonio Ry. Co. v. Woodbury, 254 U. S. 357. From the facts in that case it appears that the plaintiff Woodbury purchased a ticket from the town of Timmins in Ontario, Canada, over a Canadian railroad and by connecting carriers to El Paso, Texas. In the course of transportation over the railroad of one of the connecting carriers in Texas, a trunk belonging to plaintiff was lost. It was insisted in that case by the defendant that it was not bound by the Interstate Commerce Act, particularly that part applicable to the regulation of commerce, as the contract was made in Canada. The Supreme Court of the United States held that the test of the application of the Act was not the direction of the movement, but the nature of the transportation as determined by the field of the carrier’s operation. They held that a proper construction of the Act meant transportation by rail from a foreign country to the United States as well as from the United States to a foreign country. We are free to confess that this construction is not clear to us nor do we feel that the Act was so ambiguous as to need any construction, but the decision of the United States Supreme Court on a federal enactment is final and binding on courts of the various states. However, in our opinion, the question resolves itself in the case at bar as to whether or not the contract constituted a contract of through shipment. The bill of lading issued by the Canadian Pacific Eailroad Company, provides on its face that it is issued and received subject

to the classifications and tariffs in effect on the date of issue of the bill of lading; that the shipment was received at Saskatoon-in good order; that “said company agrees to carry to its usual place of delivery at' said destination, if on its road otherwise to deliver to another carrier on the route to said destination. ’ ’

There is nothing on the face of the bill of lading issued by the defendant, which contracts to carry direct to the City of New York. On the contrary, the carriage ,of shipment provides that the company shall carry it to its usual place of destination, if on its road, otherwise to deliver to another carrier on the route to said destination. The defendant did deliver to another carrier on the route to destination as it contracted to do. The facts take the case out of the ruling of the Supreme Court in the case of Galveston, Harrisburg & San Antonio Ry. Co. v. Woodbury, supra.

A case very much in point is that of Watson v. Canadian Pac. Ry. Co., 237 Ill. App. 478. In that case plaintiff sued to recover damages claimed to have been sustained by reason of the failure of the defendant Canadian Pacific By. Company to transport seven carloads of cattle from Calgary, Canada, to Chicago, Illinois. It appears that the contract of shipment was contained in and was part of defendant’s tariffs on file with the Board of Bailroad Commissioners of the Dominion of Canada, which provided that if shippers made shipments subject to the terms and provisions of the contract, they would be transported at a rate of freight lower than would be charged if the shipment were not transported subject to the provisions and conditions of the contract. It appeared also in that case that none of the loss or damage claimed by the plaintiff occurred on the defendant’s line. It, was contended, however, that under the contract entered into the services were to be partially performed in the United States and that the defendant was, therefore, liable as the initial carrier under section 20 of the Interstate Commerce Act. In support of' this position plaintiff cited the case of Galveston, Harrisburg & San Antonio Ry. Co. v. Woodbury, supra. The court in the Watson case held, however, that the facts in the Watson case did not bring it under the holding in the Woodbury case, as it was apparent from the contract that it was only a contract to deliver to a connecting carrier. The court in its opinion says:

“We think the language of section 20 of the Interstate Commerce Act in this respect is not materially different from that employed in section 1, and that there would be much force in plaintiff’s argument if it appeared from the record that part of the services agreed to be rendered by the defendant was to be performed in the United States as plaintiff contends. While plaintiff in his declaration alleged that the defendant agreed to transport the cattle from Calgary, Canada, to Chicago, the plea traverses this allegation and sets up that the defendant’s agreement was not to transport the cattle to Chicago, but to deliver them to a connecting carrier as agent for plaintiff in Canada; that it did so deliver the cattle to such carrier and that it did not perform or agree to perform any services in the United States.”

Under our holding in this case, that the contract was not a contract for through shipment, it necessarily follows that the provision of the bill of lading, providing that damages shall be computed on the basis of the value of the goods at the place and time of shipment, is controlling, and, there being no evidence as to such value in the record, the action must necessarily fail. Coats v. Chicago, R. I. & P. Ry. Co., 239 Ill. 154; Fry v. Southern Pac. Co., 247 Ill. 564. Under our interpretation of the bill of lading' the contract of carriage was not a through.contract, but only to a con-

necting carrier; There was no special provision in the contract under which the defendant undertook to carry the shipment, on its own responsibility, to its ultimate destination, namely, the City of New York. The fact that it had lines in the United States did not necessarily subject the shipment to the Carmack Amendment in force in the United States. If part of the carriage of shipment had been over the lines of the defendant in the United States and then handed to a connecting carrier it might have raised a different question, but this we are not called upon to answer.

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

Judgment affirmed.

Hebel and Friend, JJ., concur.


author: Mr. Justice Friend

text:
    Phil J. Boller, Defendant in Error, v. John N. Feid, Plaintiff in Error.
    Gen. No. 34,415.

      Heard in the third division of this court for the first district at the June term, 1930.
    Opinion filed March 11, 1931.
    Bernard F. Cummings, for plaintiff in error; Geo. F. Ort, of counsel.
    Deneen, Healy & Lee, for defendant in error; Boy Massena and Marshall A. Pipin, of counsel.
   Mr. Justice Friend

delivered the opinion of the court.

Pursuant to the entry of a judgment by confession in the municipal court of Chicago for $2,584.33 in favor of plaintiff and against defendant, based on a note for $2,000 and including interest and attorney’s fees, the defendant filed a motion, supported by his verified petition, asking that the judgment be vacated and he be allowed to interpose his defense in said cause. The court allowed the motion, ordered that the judgment stand as security, stayed execution which had issued prior thereto, and ordered the cause to proceed to hearing. Upon the trial had before the court without a jury judgment was rendered in favor of plaintiff in the sum of $2,584.33. This writ of error is prosecuted to reverse that judgment.

The essential facts disclose that in January, 1922, the State Commercial & Savings Bank had suffered losses to the extent of approximately $300,000, and that the auditor of public accounts then demanded that these assets be made good or the bank be closed, and that until new assets could be placed in the bank he required a guaranty from the directors; that subsequently new assets, including among others the note of one W. S. Adams, were placed in the bank and the directors were thereupon discharged from their guaranty; that in March, 1923, the financial standing of the bank being again impaired, Joseph Stein, its president, requested defendant, as a stockholder in said bank, to give securities to aid the bank and make good the depleted assets; that the defendant, complying with this request, executed and delivered to the bank two or three $1,000 notes for the purpose of having them carried as assets and to be shown as such to the auditor upon examination of the bank’s finances; that in November, 1923, plaintiff executed the note in suit as a renewal of notes previously made; that the note in question was signed by defendant and made payable to the order of “myself” and indorsed by defendant ; that the note sued on was given for the same purpose as the original note and with the understanding that defendant was not to pay interest thereon and that the bank would take care of the note and return it to him when no longer needed.

There is some conflict in the evidence as to whether the original notes of defendant were given to apply on and to pay the balance due on the note of W. S. Adams, but defendant himself testified that he did not know Adams, had no reason to pay the balance due on his note and did not receive the note, and the court evidently found this to be the fact, but whether the note was given to apply on the Adams note or merely as an addition to the assets in the bank, it appears to be clear from the record that its purpose was to make a showing to the auditor in order to enable the bank to remain open.

When the bank was closed in February, 1924, for insolvency and a receiver appointed to take possession of its assets, its liabilities exceeded the assets by more than $86,000. As a result of this condition a new bank, The Milwaukee-Western State Bank, was formed under the auspices of. a committee of depositors and stockholders, with new capital and under an arrangement whereby the depositors, who could not hope to receive the full amount of their deposits in the State Commercial & Savings Bank, took .50 to 75 per cent of their deposits in stock of the new bank. Defendant was one of the stockholders and depositors in this organization. The Milwaukee-Western State Bank then bought of the receiver, and he sold, assigned and transferred, all of the assets of the State Commercial & Savings Bank in return for the assumption by the Milwaukee-Western State Bank of all liabilities of the old bank, including stockholders’ liability, and the new bank paid the costs of the receivership, including receiver’s and attorney’s fees. Among the assets so transferred to the Milwaukee-'Western State Bank, was the note of defendant for $2,000. This note was carried as an asset of the new bank until May, 1926, when, owing to the weakened condition thereof, the bank auditor ordered $30,000 worth of assets, including defendant’s note, to be removed and new assets substituted. As a result 12 of the directors of the new bank, including plaintiff, bought these assets and paid the face value thereof, each contributing $2,500. These assets, including the note of defendant, were then taken out of the hank and delivered to the purchasers, who subsequently turned them over to their attorney for collection with instructions to confess judgment on defendant’s note in the name of Phil J. Boiler, plaintiff herein. The defendant was a director of the State Commercial & Savings Bank for about a month before it was closed and in accordance with the agreement whereby its assets were bought by the new bank, he defended a stockholders’ liability suit brought against the stockholders of the State Commercial & Savings Bank, in which he was included.

Niblack v. Farley, 286 Ill. 536, applying the doctrine announced in Golden v. Cervenka, 278 Ill. 409, lays down the rule that one who executes notes or other securities to a bank for the purpose of making an appearance of assets, so as to deceive the examiner and enable the bank to continue business, is estopped, as against the receiver of the bank, to plead want of consideration. Defendant seeks to exclude this case from the operation of the principle announced in the foregoing cases by stressing the fact that (1) this is a suit by the assignee or transferee of the receiver and not the receiver himself; (2) that it does not appear that at the time the State Commercial & Savings Bank was closed, the losses of the bank were any greater or the bank any more insolvent than when defendant gave his original notes nearly a year prior thereto; and (3) that there was no deception of the auditor since he had prior to the execution of the original notes demanded that the deficit then existing be made good by new assets.

With respect to the first of these contentions, it is argued that these were accommodation notes, and that plaintiff was not a holder in due course. It has been held that the receiver of an insolvent bank, when attempting to marshal the assets of such bank for the benefit of its creditors, is in law an innocent holder and may maintain an action even where the bank itself could not do so. (Mueller v. Novak, 251 Ill. App. 262.) One of the rights of an innocent holder of negotiable paper is the privilege to sell and transfer title and therefore when the receiver of the State Commercial & Savings Bank assigned the note sued on to the Milwaukee-Western State Bank, which in turn passed the same right to plaintiff, the latter acquired the right to bring suit by reason of the transfer or assignment to him. To hold otherwise would make it insecure for persons to buy of a receiver the assets of defunct banks, for the purchaser would have no assurance that he could collect thereon. The defenses made could not have been asserted against the receiver if he had sued on the note, and can therefore not be interposed as against plaintiff.

Defendant further contends that the losses of the State Commercial & Savings Bank were no greater at the -time the receiver was appointed than when his notes were executed, and from this it is argued that the creditors of the bank were not injured by the transaction. It appears, however, from the evidence of Joseph Stein, president of the bank and one of the defendant’s own witnesses, that the assets decreased between these two dates; that while the capital remained intact, the surplus had become depleted and that when the bank was closed liabilities exceeded assets by more than $86,000, and when the'assets of the bank were assigned by the receiver to the Milwaukee-Western State Bank, the shortage of the bank exceeded the capital stock, surplus and undivided profits by some $26,000. Thus the loss to depositors was greater when the bank was closed than it would have been when the notes were executed. ■ In the interim between these dates the public continued tb deposit money in reliance on the responsibility of the bank, as evidenced by the fact that the State auditor, whose duty it was to determine the soundness of the bank, allowed it to continue doing business and defendant, a stockholder of the bank, having knowingly and intentionally placed his notes among the assets of the bank for the very purpose of making a-showing to the auditor so as to keep the bank open, is estopped to assert that his notes were merely accommodation paper for which no consideration passed.

Considerable reliance is placed by defendant on the case of McComb v. Jacobs, 256 Ill. App. 141. In that case the court held that the receiver could not recover against the defendant who had given his note at the request of an officer of-the bank to be used for a few days to cover some papers of the bank then in transit. The decision, however, is clearly based on the ground that the condition of the bank had not been shown and that from all that appeared there was sufficient to pay all creditors in full and that there actually was paper in transit at the time the defendant’s note was given. In other words, the court held that “the proofs must show that the giving of the note or the acceptance of it by the bank was to accomplish in some manner a fraud.” The McComb case is not at variance with Niblack v. Farley, supra., The record in the instant casé discloses facts from which fraud is evident.

It is further urged that the auditor was not deceived, since he had prior' to the execution of the original notes demanded that thé deficit then existing be made good by new assets. As to this contention we consider it sufficient to point out that the auditor in ordering replacement had in mind valid securities upon which the bank itself could collect, otherwise the rehabilitation would amount to nothing more than mere figures on the books of the bank, and consequently any secret agreement by the bank’s' officers that it would not require defendant to pay the notés would be a clear deception on the auditor who allowed the bank to remain open on the strength of this and other apparent assets.

Defendant further urges as a ground for reversal that this suit was improperly brought in the name of plaintiff. It is argued that since 12 persons each contributed $2,500 to make up the $30,000 used for the purchase of the notes, including the one sued on, the suit should have been maintained in the name of all 12; also that there is no evidence to prove that the note in suit was ever delivered to the plaintiff. The latter point may be disposed of by reference to the pleadings. The statement of claim alleges that the note was “delivered to plaintiff for value, who is the legal owner thereof.” This statement is supported by an affidavit of claim. There being no denial of delivery by defendant’s affidavit of merits, the allegation will be taken as admitted and the question cannot now be raised. It was so held in Lindenthal v. Northwest State Bank, 221 Ill. App. 145, as applicable to municipal court procedure.

As to whether plaintiff is a proper party, it should be noted that the note sued on is a bearer instrument to which title passed by delivery. Plaintiff was one of the 12 persons who directed judgment to be taken, and since the note was past due, the judgment obtained in favor of plaintiff is sufficient protection against suit by any of the other parties. It was so held in Lyman v. Kline, 128 Ill. App. 497, where the court said:

“Appellants (defendants) were not denied the benefit of any defense which they could have made had all the parties interested in these notes been parties to the suit. Their rights have in no way been curtailed or affected to their disadvantage. It is well settled that where a note is indorsed in blank suit may be brought in the name of any person who does not object, about which a defendant has no concern and cannot be heard to complain. Whitford v. Herling, 60 Ill. App. 413; Henderson v. Davisson, 157 Ill. 379.”

There are other objections relating to the admissibility of evidence and the degree of proof required to establish fraud, but we believe the record amply supports the conclusions of the trial court upon the essential facts established by competent evidence and its conclusions of law, as here discussed, to establish defendant’s liability.

For the reasons stated the judgment of the municipal court will be affirmed.

Affirmed.

Wilson, P. J., and Hebel, J., concur.