text:
    Lynn Ankrom, Executor, and Ora Wiese, Executrix of the Estate of Sarah J. Ankrom, Deceased, Appellee, v. W. A. Doss (Lillie Biedert et al.), Appellant.
    Gen. No. 8,737.
    Opinion filed April 11, 1933.
    W. A. Doss, Carl I. Glasgow and C. E. Corbett, for appellant.

      E. J. Hawbaker, for appellee.
   Mr. Justice Shurtleff

delivered the opinion of the court.

This case arises upon a petition to sell real estate to pay debts in the estate of Sarah J. Ankrom, deceased, in the county court of Piatt county. In this petition to sell real estate to pay debts one of the defendants is W. A. Doss, the appellant in this case. The appellant, on February 5, 1931, filed a claim against the estate in the county court for the sum of $1,973.49, under oath, and attached thereto was a certified copy of a transcript of a judgment obtained in his name in the circuit court of Shelby county against Sarah J. Ankrom, by confession, on July 24, 1925, for $1,917.66 and $5 costs. On the back of this claim, in the usual form, was the entry of appearance of Ora Wiese, executrix, and Lynn Ankrom, executor of said estate, entered at the April term of court, 1931, objecting to its allowance. On April 6, 1931, the executor and executrix were granted leave to file a motion in the said circuit court of Shelby county to set aside said judgment, and for leave to plead. On February 25, 1932, in said county court, appellees filed their usual form of petition to sell real estate to pay debts, having theretofore filed their just and true account, etc., and among other things alleged in said petition there was a mere general objection to the allowance of the claim of W. A. Doss, appellant, and W. A. Doss was made one of the defendants thereto. Doss thereafter, on March 7, 1932, filed his written answer thereto.

On May 27, 1932, appellees filed an amendment to the original petition. On May 28, 1932, Doss, appellant, filed his general and special demurrer thereto, which was overruled and exception taken. Appellant Doss thereafter filed his written motion for a rule on the appellee to file written defenses to his claim, which was by the court overruled and exception taken. Thereafter, said Doss also filed general and special demurrer to the amendment to the said original petition, which was overruled and exception taken. Thereafter, said appellant filed answer to the original and amended petition on May 31, 1932, to which answer appellee filed replication. Thereafter, appellant, Doss, filed an objection to certain homestead property being sold, on the ground that it was worth less than $1,000, but upon appraisal the value was found to be $1,200, and appellant’s motion and petition were denied.

In appellant’s statement of the case it was recited:

“In view of the fact that some confusion has arisen in this.case, and has caused considerable difficulty in trying to fix the record in this case, due to the fact that petitioners’ attorney insisted, and the trial court permitted, the record of the trial of the original claim of W. A. Doss filed in this cause to be included in the decree of the petition to sell real estate to pay debts as a part of the record in that case, while, on the other hand, the trial judge allowed the appeal on that claim to the Circuit Court of Piatt County, we deem it necessary to make a few brief statements of fact regarding the trial of that claim, since opposing counsel insisted and demanded that the testimony on the trial of that claim be included in the bill of exceptions in that case. . . . We very frankly admit that we do not know whether this decree means that the lien of the judgment of appellant, W. A. Doss, in the Circuit Court of Shelby County is limited to the lien on the real estate in that County to only four hundred dollars, or that the judgment is valid as a judgment to its entire amount as a claim to be later adjudicated on its appeal now pending in the Circuit Court of Piatt County. . . .We merely make this statement as a reason why we are not attempting to state what that decree means or does not mean on that subject matter, which we objected to as to its form and substance, and we are still objecting, as it is ambiguous,-indefinite and uncertain. ’ ’ So that we get little light in this case from appellant’s presentation of the same. Appellant’s abstract omitted much of the salient facts in the case, so that an additional abstract was filed and from it and the whole case we find the following state of facts existed:

The two controversies and questions to be presented arose out of a petition to sell real estate to pay debts, filed by the executor and executrix of the estate of Sarah J. Ankrom. There is no question but that the petition was proper, and it was necessary to sell all of the real estate mentioned therein in order to pay the debts.

The first question presented for review is, whether it was necessary and proper, before the petition to sell real estate could be granted, to determine whether or not the judgment obtained by W. A. Doss on the note in Shelby county was a valid and existing lien on the land there, and, since there was a claim filed, whether the court properly set the claim for hearing and correctly tried that matter and entered the proper decree in reference thereto.

The second question is, Did the county court proceed correctly upon the coming in of the report of the commissioners which reported that the homestead could not be set aside from the property and valued the whole at $1,200 (Andrew D. Ankrom filed no consent to the sale of the homestead), and did the court act properly in refusing to grant the motion of W. A. Doss that the sale of the property, which included the homestead, be postponed until after the death of the homesteader, Andrew D. Ankrom?

Sarah J. Ankrom in her lifetime was seized of the following described property: Tract one, a house and lot in Villa Grove, Douglas county, Illinois; tract two, a homestead in the Village of Cerro' Gordo, Piatt county, Illinois; tract three; 80 acres of land in Shelby county; and a life estate in considerable property' in Douglas county, Illinois'. Her husband, Andrew D. Ankrom, was also seized of 240 acres ©f land about the time of the' origin of the controversy herein related.

On September 2,1924, Andrew D. Ankrom and Sarah J. Ankrom gave to John W. Vent, then president of the State Bank of Cerro Gordo, their promissory note in the principal sum of $14,000 payable in 30 months, who, at maturity, confessed judgment thereon in the amount of $15,547.33. W. A. Doss filed a motion to open same, supported by the affidavit of Sarah J. Ankrom, alleging certain facts concerning the making of the note which caused the circuit court to open the judgment and give leave to plead. These facts, if true, would have defeated the cause of action as against Sarah J. Ankrom. At that time her husband was the owner 'of sufficient real estate and other property to have satisfied the entire judgment obtained on the note which he had signed as principal and which Mrs. Ankrom had signed only as surety.

After the judgment was taken the sum of $1,430 was paid to the bank, obviously by Andrew D. Ankrom since Sarah J. Ankrom'was contesting the validity of the judgment. This judgment was confessed in the circuit court of Piatt county.' The bank also took judgments" on three other notes aggregating $3,462.62. Mrs. Ankrom was not a party to judgment of any of these notes, as shown by the testimony of Mr. Ankrom and attorney Reed, who represented the bank. The indebtedness of these judgments was incurred by a son, Ralph.

After filing the motion to set aside the judgment as against Sarah J. Ankrom on February 25, 1927, W. A. Doss wrote a letter to his client advising her of impending negotiations with Mr. Re.ed and a settlement of the judgment, which had been taken against her. The parties met in the office of Mr. Reed in Monticello, March 17, 1927, and the contract there entered into shows that the parties proceeded to settle all of the cases and that Mrs. Ankrom was induced to assume indebtedness in the amount of $3,462.62 in two of the cases, and that she paid $1,537.38 on the larger judgment or a total of $5,000. After this agreement was reached and the parties were leaving, Mrs. Ankrom was beckoned into the office of W. A. Doss, detained two hours, and came out crying, and it was on that occasion that he "procured the note of $1,582.

When the circuit court next convened the order of dismissal and settlement of the cases was entered.

On July 24, 1929, an attorney employee, N. E. Hut-son, caused judgment to be taken on said note against Sarah J. Ankrom in the circuit court of Shelby county for the principal, interest, and $150 attorney fees. Attorney Hutson received no part of the said fees. There was never any execution issued from that court and sent to Piatt county, Illinois, where the said Sarah J. Ankrom resided and she knew nothing of the judgment, nor did the said executrix and executor know anything of it until a claim was filed with a transcript of it. The said executrix and executor were then represented by the late John Chadwick, negotiations ensued between the representative of said estate and the attorney of W. A. Doss with reference to opening said judgment in Shelby county and finally a stipulation was entered that the matter might be postponed without prejudice.

When the petition to sell real estate to pay debts was filed the claim was undisposed of. An amendment to the original petition was filed and set forth more in detail the manner of the procuring of the note, the alleged consideration therefor, and that the amount of the note was so far in excess of the value of the services rendered that the taking of the same was tantamount to fraud; that the judgment lien in Shelby county constituted a cloud on the title of the 80 acres and that it should be removed in the proceedings to sell real estate to pay debts. A demurrer was filed to the amendment but was overruled; and the claimant, W. A. Doss, demanded a jury trial. His request was granted by the court and a jury of six was agreed upon and the claim was tried in the county court. The verdict of the jury was in favor of the claimant, W. A. Doss, in the sum of $400.

The trial of that claim was a part of the petition to sell real estate to pay debts; and under the issues framed the court was exercising the broad equitable powers of the county court in such matters. The court heard all the evidence and found that the true and cor- " rect amount due and owing to the claimant was $40.0, " as specified in the verdict. The decree of the county court provided that the judgment in Shelby county should be set aside, vacated, and annulled as a lien on the title of said real estate.

The practice in cases of petition to sell real estate to pay debts is analogous to the chancery practice. The party in whose favor the decree is granted should preserve the evidence or the decree must find specific facts that are proven on the hearing. (Larsh v. McClelland, 194 Ill. App. 38; Akin v. Akin, 268 Ill. 324; Garrard v. J. S. Ashbrook Co., 222 Ill. App. 387.)

When the relation of attorney and client exists at the time a note is executed, the client is not required to establish fraud or imposition in order to defeat the note. The relation having been shown when the note was executed, the burden of proof rests on the attorney to show fairness and adequacy of consideration. (Faris v. Briscoe, 78 Ill. App. 242; Broholm v. Anderson, 178 Ill. App. 623; Willin v. Burdette, 172 Ill. 117; Robinson v. Sharp, 201 Ill. 86.)

Since the amendment to the Administration Act, June 15, 1887 (sec. 101), Cahill’s St. ch. 3, 1J102, the county court has the power in a proceeding to sell real estate to pay debts to call before it adverse claimants to the land and any and all lien holders and adjudicate upon their rights to the extent of setting aside deeds or vacating judgments before ordering the land to be sold. (Newell v. Montgomery, 129 Ill. 58; Lininger v. Helpenstell, 229 Ill. 369; Schottler v. Quinlan, 263 Ill. 637; Clayton v. Clayton, 250 Ill. 433; Sawyer v. Wiemers, 182 Ill. App. 651.)

Taking up the second issue of this case, the motion of W. A. Doss to postpone the sale of the Cerro Gordo property until the death of Andrew D. Ankrom, the duly qualified commissioners had reported that they were unable to assign homestead in the premises to Andrew D. Ankrom and that the total value of the premises was $1,200. To impeach this report Earl Griswold and John W. Vent were called by W. A. Doss and they thought the property would sell for somewhere around $1,000. It is specifically provided in the decree that if the property does not sell for more than $1,000, there is to be no sale thereof. The executor, Lynn Ankrom, testified in the said hearing that he had known the property for 33 years, that his father lived in the property as his homestead, the roof was beginning to need repair and would have to be renewed, that there was $113.96 unpaid taxes carried over from the year previous, and that they had no money to pay'the taxes or to pay insurance; that they had been unable to get any tenant for the house and that he thought the house would bring at a public sale between $1,200 and $1,500, and that his father was living on the charity of his children. The court, after hearing the matter, ordered this property included in the decree of sale of all the property.

Where, on a petition to sell real estate, the homestead exceeds in value the sum of $1,000 and there is no written consent to sale by the husband, it is the duty of the court to decree the sale of the property embracing the homestead if the property can be sold for more than $1,000. (Cutler v. Cutler, 188 Ill. 285; Powell v. Powell, 247 Ill. 432; Goddard v. Landes, 250 Ill. 457.)

It has been held in In re Estate of Duffield, 258 Ill. App. 78:

“This statute has been uniformly held to require that claimants must, in order to participate in the distribution of the assets of an estate, present their claims, for the purpose of having them allowed. Failing to do so, they can only have their claims satisfied out of property not inventoried. Roberts v. Flatt, 142 Ill. 485-490; Waughop v. Bartlett, 165 Ill. 124-131; Strauss v. Phillips, 189 Ill. 9-23; Morse v. Pacific Ry. Co., 191 Ill. 356-361. Beebe v. Kilpatrick, 321 Ill. 612-617.”

We have read the entire record and are satisfied that the decree of the county court of Piatt county is free from error, just and correct.

We have read the letter of appellant in the additional abstract presented by appellees, and the whole record shows succinctly the nature of the claim which W. A. Doss had against Sarah J. Ankrom and how it was obtained. The conduct of counsel for Sarah J. Ankrom has not been exaggerated. Whether the decree in this cause will close the doors of other courts to appellant to litigate the matter of this fee, note and judgment further, we are not called upon to determine. From cases cited, it would appear that the 80 acres of land in Shelby county, “had escaped its clutch.” If other lands belonging to Sarah J. Ankrom should be discovered, not covered by this decree, doubtless the litigation in some manner could be pursued.

The decree of the county court of Piatt county is affirmed.

Affirmed.


source: Caselaw Access Project

author: Mr. Justice O’Connor

license: Public Domain

text:
    Sigmund Wolkenstein, Appellee, v. Joseph Slonim et al., Defendants. Appeal of Chicago City Bank and Trust Company, Appellant.
    Gen. No. 36,496.

      Opinion filed April 24, 1933.
    Rathje, Wesemann, Hinckley & Barnard, for appellant ; Francis E. Hinckley, of counsel.
    Hyman J. Rosenberg, for appellee; Abraham Miller and Byron C. Sharpe, of counsel.
   Mr. Justice O’Connor

delivered the opinion- of the court.

By this appeal the Chicago City Bank & Trust Company, trustee in a trust deed given to secure the payment of an indebtedness, seeks to reverse an order or decree of the circuit court of Cook county refusing to order the receiver, appointed in a foreclosure suit of a junior mortgage, to surrender possession of the property to it.

October 21, 1932, Sigmund Wolkenstein filed his verified bill to foreclose a second mortgage dated December 10, 1926, on certain real estate in Chicago, given to secure payment of $10,000, on which there was a balance due and unpaid of $1,250. It was alleged there was another trust deed on the property superior to complainant’s lien, on which there was an unpaid balance of $46,000 and on which there was a default of $1,000 on account of principal and $1,380 for interest; that certain taxes were due and unpaid; that the premises were improved with a three-story brick building containing 15 apartments, and that the fair cash market value of the entire property was $45,000. The bill prayed for a receiver and a foreclosure of the mortgage. The parties interested in the first mortgage were not made parties defendant. The trust deed which was made a part of the bill recited that it was subject to a first trust deed dated October 1, 1925, given to secure an unpaid balance of $58,000. It bore a rubber stamp legend stating that it was subject to another trust deed dated October 15, 1930, and it was alleged the last mentioned trust deed was given to secure an indebtedness of $47,000 on which there was a balance due of $46,000, as above mentioned.

October 24, 1932, three days after the bill was filed, on motion of complainant a receiver was appointed; the next day the receiver accepted the appointment and the day following filed its bond and entered upon the discharge of its duties. October 29, by leave of court, the Chicago City Bank & Trust Company, as trustee named in the trust deed which was a first lien on the property, filed its intervening petition, which was duly verified, in which it set up the making by the mortgagor of the trust deed given to secure the $47,000 indebtedness, and that the rents and profits as well as the property were pledged to secure payment of the indebtedness. It was further alleged there was default in payment of $1,000 on account of principal and $1,380 on account of interest; that the trust deed sought to be foreclosed by complainant was junior and inferior to petitioner’s; that, by virtue of the defaults, the petitioner, under the provision of the trust deed, was entitled to the possession and control of the premises, and a request was made that an order be entered that the receiver turn over the property to the petitioner; that the petitioner could control and operate the property as mortgagee in possession at an expense not to exceed four per cent of the gross rents, while the receiver could not do so for less than 10 per cent of the gross rents. It was further alleged that on October 24, 1932, three days after the bill in question was filed, certain owners of the $47,000 indebtedness secured by the trust deed had filed their bill in the superior court of Cook county to foreclose that trust ■ deed, which suit was still pending. November 1, 1932, an order was entered, on motion of the receiver, authorizing him to employ counsel.

November 7, Sigmund Wolkenstein, complainant, and the receiver, filed their separate unverified answers to the petition. In his answer complainant denies, inter alia, that his trust deed is junior and inferior to the petitioner’s trust deed, but admits that his lien is junior and inferior to the lien of petitioner; denies the petitioner is entitled to possession of the property; admits the filing of the bill in the superior court to foreclose the first lien, and avers that complainants in that bill prayed for the appointment of a receiver, which motion was still pending and undisposed of. The answer then makes the complainant’s bill a part of the answer to the petition and denies that the property should be turned over by the receiver to the petitioner. The answer of the receiver denies that the trust deed mentioned in the intervening petition gives the trustee the right to take possession of the premises without any order of court, but avers that the only remedy provided in the trust deed is-that the trustee may, in a proper case, apply for the appointment of a receiver in a court of equity. There was a hearing on the petition and answers, the prayer of the petition was denied, the petition dismissed, and this appeal prosecuted.

In support of its contention that the decree dismissing its petition is- wrong and should be reversed, reliance is chiefly placed on the cases of Altschuler v. Sandelman, 264 Ill. App. 106, and Consumers Bond & Mortgage Co. v. Sadin, 266 Ill. App. 141. The holding in each of these cases is that where a receiver is appointed in a suit to foreclose a junior mortgage, the trustee of a prior mortgage, which is a first lien on the property, may intervene and have the receiver turn the property over to him. Firebaugh v. Seegren, 269 Ill. App. 47. In the instant case counsel for the petitioner say. that the Altschuler and Consumers Bond, etc. cases are directly in point, sound in reason, and should be followed. The chancellor was of the opinion that the holding in those two cases was founded in the main upon English authorities, which materially differ from the holding of our Supreme Court in foreclosure cases. The chancellor in his opinion said, among other things: ‘ ‘ despite the rights granted in the contract creating the lien, where the'parties specifically grant the right for the appointment of a receiver, nevertheless, once the case is in a court of chancery, that court will look to the equities and will not appoint a receiver and will not disturb the possession of the mortgagor if it appears that the property is ample security for the debt.

“Now, is it conceivable that where that becomes a policy of courts, that they will allow the parties, without the showing of the insufficiency of the security, in a case where the security may be two or three times as great as the amount of the debt, to simply go in there and take physical possession?” And that once a court of chancery takes possession of the property and any one interferes; he must do equity; that under the stress of the times the arbitrary right' of a trustee in a trust deed to take possession of the property ought to be discouraged; that subordinate liens ought not to be placed at the mercy of the superior lien so as to deprive the former of its right to come into a° court of chancery on condition broken, and have the property so administered that it may receive what is left after paying the prior incumbrances. We are in accord with these views.

It has often been held that a court of chancery is not bound to appoint a receiver in a foreclosure suit merely because the trust deed provides for the appointment of a receiver in case of default, that the court will look to the equities in the case; and that such a provision in a trust deed or mortgage is entitled to weight in determining whether the court should appoint a receiver. Bagley v. Illinois Trust & Savings Bank, 199 Ill. 76; Bothman v. Lindstrom, 221 Ill. App. 262; Frank v. Siegel, 263 Ill. App. 316. We think this same rule should apply when a trustee in a trust deed which is a first lien on the premises, intervenes in a foreclosure suit involving a junior lien, and requests that the property be turned over to him.

In the instant case, according to the allegations of complainant’s verified bill, there is an incumbrance of $46,000, which is a lien prior to that of complainant’s; that default has been made, of which $1,000 principal and $1,380 interest are due and unpaid; that general taxes are due and unpaid and that the property is not worth more than $45,000. In these circumstances we think the equities are in favor of the trustee. The probabilities are that in case of a decree of foreclosure and sale, the property would not bring enough to pay the first lien and therefore the costs and expense of a receivership ought not to be incurred.

The mortgagor is the legal owner of the mortgaged property as against all persons except the mortgagee or his assigns, and after condition broken he may maintain an action of ejectment. Oldham v. Pfleger, 84 Ill. 102. “The fee title held by the mortgagee is in the nature of a base or determinable fee. The term of its existence is measured by that of the mortgage debt. When the latter is paid or becomes barred by the Statute of Limitations the mortgagee’s title is extinguished by operation of law. . . . Until it is extinguished the legal title is in the mortgagee for the purpose of obtaining satisfaction of his debt.” Ware v. Schintz, 190 Ill. 189; Lightcap v. Bradley, 186 Ill. 510.

In the Lightcap case last cited, Mr. Justice Cartwright in speaking of the harshness of strict foreclosures said (pp. 519-20): “Equity assumed jurisdiction to relieve the mortgagor against a forefeiture upon default, and he was relieved from it on payment of the debt. (1 Jones on Mortgages, sec. 8.) Courts of law, following the lead of courts of equity, have adopted many equitable principles as to the titles of the respective parties, and at law the title of the mortgagee can be used only for the purpose of securing his equitable rights under it. ‘As to all persons except the mortgagee and those claiming under him, it is everywhere the established modern doctrine that a mortgagor in possession is at law, both before and after breach of the condition, the legal owner. ’ (1 Jones on Mortgages, sec. 11.) . . . This State has adhered to the rule that at law a title vests in the mortgagee, but only for the protection of his interests. For the purpose of protecting and enforcing his security the mortgagee may enter and hold possession by virtue of his title and take the rents and profits in payment of his mortgage debt. He may maintain the possessory action of ejectment on the strength of such title, but the purpose and effect of the action are not to establish or confirm title in him, but, on the contrary, to give him the rents and profits which undermine and destroy his title. . . . When the rents and profits have paid the mortgage debt, both the title and right of possession of the mortgagee are at an end.” The court then discusses the interest of the mortgagor in the mortgaged land, and said (pp. 520-521): “the earliest doctrine in England settled that the whole legal estate was in the mortgagee, but that the strictness of the law has yielded to the principle of justice and equity, and the doctrine held in the United States in regard to the estate of the mortgagor is, that he is to be treated as the real owner of the estate for all beneficial purposes, subject only to the rights and encumbrance of the mortgagee. ’ ’ The court then referred to another Illinois case and continuing said: “After referring to the common law rule that the mortgagee held the legal title in fee and that the mere equitable right of the mortgagor could not be sold on execution, . . . ‘But many of the States' — -and ours of the number — have, by enactment, made great modifications of the rule. Our legislature at an early day provided that when the mortgagor paid and satisfied the debt and the mortgage had been recorded, he might compel the mortgagee to enter a satisfaction of the mortgage on the margin of the record, which should operate as a discharge and release of the same and forever bar all actions that might be brought thereon. . . . This was a most material modification of the common law rule, as it reinvested the mortgagor with the title simply by the mortgagee stating, over his signature, on the margin of the record, that he had.received satisfaction of the debt, and dispensing with a release or re-conveyance for the purpose.’ ” The court further discusses Illinois authorities, all to the effect that the law in this State is different from the law of England.

Where a mortgagee is in possession and it is contended that he has managed the property inefficiently or has refused to account, a court of equity will require him to render an account of his acts And doings. Oldham v. Pfleger, supra (84 Ill. 102). In Firebaugh v. Seegren, supra (269 Ill. App. 47), this court ordered the property in foreclosure to be taken out of the trustee’s hands and placed in the hands of a receiver. There it appeared that the trustee named in a trust deed given to secure an indebtedness took possession of the property and operated it. Thereafter he filed a bill praying for a foreclosure of the trust deed. Later some of the parties in interest filed a petition for the appointment of a receiver to take possession of the property from the trustee, and it was shown that the trustee had not property managed the property; the court appointed a receiver, ordered the trustee to turn over the property and this order was upheld. There the equities were- considered and applied. And in Erickson v. Ehresman, 269 Ill. App. 343, the trustee of a trust deed given to secure an indebtedness petitioned the court to discharge the receiver appointed in a creditor’s bill, and that the property be turned over to the trustee.1 The prayer of the petition was denied, and upon appeal to this court the order of the chancellor was affirmed on the ground that since the trustee, on his own petition and motion, had had the receivership extended to protect his interests, he would not be permitted thereafter to seek the removal of the receiver. In the case of Karsh v. Glicksberg, 269 Ill. App. 638, a receiver was appointed in a suit to foreclose a second mortgage and afterward the trustee of a prior trust deed petitioned for a writ of assistance to oust one of the owners of the equity occupying an apartment in the building and a tenant occupying another apartment, we affirmed the order denying the writ on the ground that it was the duty of the trustee, under the allegations of his petition, to endeavor to collect all the rents he could from the premises so as to reduce the indebtedness, and that he had made no showing that the two parties occupying the apartments were objectionable as tenants or that they had refused to pay the rent to him.

From the foregoing authorities it appears that whether a trustee in a trust deed, or a receiver in a foreclosure proceeding, is entitled to the possession of incumbered property, the equities of the situation in each case must be considered. So, in the instant case, we think the equities are on the side of the trustee. Complainant’s sworn bill shows that taxes are unpaid, that there is a default on account of principal and interest due under the first mortgage, and that the property is not worth the amount of the first mortgage and costs. Under these circumstances there is no reason for incurring the expense of a receivership, especially where the trustee offers to manage the property for less than the cost of receivership.

Complainant contends that under the terms of the trust deed to the Chicago City Bank & Trust Company, it is not entitled to take possession of the premises but is entitled to have a receiver appointed only upon default. By the terms of the trust deed, the premises, as well as the rents, issues and profits, were conveyed to the Chicago City Bank & Trust Company, and the fact that the trust deed provided that upon default a receiver might be appointed to collect the rents during the pendency of such foreclosure and until the period of redemption should have expired, was not the only remedy given to the trustee to collect the rents. Under the authorities, after condition broken the mortgagee is, as between him and the mortgagor, the owner of the premises and can take possession of them and collect the rents until the debt is paid. Lightcap v. Bradley, supra (186 Ill. 510); Rohrer v. Deatherage, 336 Ill. 450.

We think there is no merit in the further contention made by complainant that the legal title to the property is in the trustee, securing' the indebtedness he seeks to foreclose, because that trust deed is dated December 10, 1926, while the trust deed representing the first lien on the premises is dated October 15, 1930, for two reasons: first, the trust deed of 1930 was executed to take the place of a trust deed given in 1925 to secure $58,000 indebtedness above mentioned; and the trust deed of 1926 expressly states that it is subject to the unpaid balance of the $58,000, payment of which was secured by the trust deed of 1925. And, further, there is a rubber stamp legend on the trust deed of 1926 in which it is expressly stated that that trust deed is subject to the lien of the trust deed of 1930. Moreover, complainant in his bill alleges that the incumbrance secured by the trust deed which seeks to foreclose is subject to the balance unpaid on the $47,000; and also there appears in the record a document signed by the trustee of the trust deed which expressly subordinates the lien of complainant to that of the unpaid balance of $47,000.

In the Altschuler and Consumers Bond cases (264 Ill. App. 106, and 266 Ill. App. 141), no facts appear which would indicate whether the equities were in favor of the trustee or of the receiver, and therefore the terms of the trust deed giving right to the trustee were enforced. In the instant case the equities, as above discussed, are all in favor of the trustee, and in view of this fact and in view of the provision of the trust deed, the property should be turned over to the trustee.

For the reasons stated the order of the circuit court of Cook county is reversed and the matter remanded with directions to enter an order in accordance with the views stated in this opinion.

Reversed and remanded with directions.

McSurely, P. J., and Matohett, J., concur.


author: Mr. Presiding Justige MoSurely

text:
    Herbert E. Verst, Appellant, v. Foreman-State Trust and Savings Bank et al., Appellees.
    Gen. No. 36,534.

      Opinion filed May 8, 1933.
    Sid Mogul, for appellant; Samuel Grossman, of counsel.
    Tenney, Harding, Sherman & Rogers, for appellee University of Chicago; Henry F. Tenney, L. Dow Niohol, Jr., and William W. Miller, of counsel.
   Mr. Presiding Justige MoSurely

delivered the opinion of the court.

This is an appeal by complainant from an order denying his motion to vacate a prior order directing the receiver herein to apply $2,269.48 in his hands on account of accrued taxes levied upon the property involved in foreclosure proceedings.

The lien for taxes is a first and prior lien to all titles and claims of all parties. People v. Evans, 262 Ill. 235. It is well established that a court having under its control property upon which taxes are due, will, as the representative of the sovereignty, direct them to be paid before all other claims except judicial costs. Cooley on Taxation (4th ed.), vol. 3, sec. 1352. In Wiswall v. Kunz, 173 Ill. 110, it was held that taxes upon property in the hands of a receiver may properly be regarded as part of the costs and expenses of receivership and may be ordered paid as other costs and expenses. Among other decisions in this State asserting this rule are Gorham v. Farson, 119 Ill. 425; Atwood v. Knowlson, 91 Ill. App. 265; Ortengren v. Rice, 104 Ill. App. 428. In Driever v. Shephard, 259 Ill. App. 239, we said in substance that if the current taxes were not paid a superior lien would be established, and that the receiver should see that the property is car.ried to the judicial sale free and clear of such liens. Cases from other jurisdictions supporting this view are Walser v. Northern Valley Bldg. Corp., 109 N. J. Eq. 126, 156 Atl. 783; American Nat. Bank v. Northwestern Mut. Life Ins. Co., 89 Fed. 610; In re Tyler, 149 U. S. 164. In Taylor v. Sutherlin-Meade Tobacco Co., 107 Va. 787, the court held that “It is the universal rule that a court, as the representative of the sovereignty of the state, will make no order for the distribution of funds in custodia legis until provision is made for payment of taxes and levies due to the commonwealth and its municipalities.”

It is also the rule in this State that taxes upon property foreclosed cannot be paid by the receiver after sale. Reeve’s Illinois Law of Mortgages, vol. 2, sec. 564. This distinction was discussed and observed in Bothman v. Lindstrom, 221 Ill. App. 262; also in Stevens v. Hadfield, 196 Ill. 253, and Davis v. Dale, 150 Ill. 239. The reason for this is that the owner of the equity of redemption is not chargeable with payments of taxes for the purchaser, except in case of redemption as provided by statute. Cahill’s St. ch. 77, If 28.

In Ranney v. Peyser, 83 N. Y. 1, cited by complainant, at the time of the entry of the order that the receiver pay taxes the first mortgagee had foreclosed the mortgage and had purchased the property himself. It was held that he had bought the lands subject to taxes. In the instant case, when the receiver was ordered to pay the taxes in question there had been neither decree nor sale. Under these circumstances the court properly could order the receiver to pay the taxes out of any funds coming into his hands as part of the costs and expenses of the receivership.

The particular circumstances presented in this case malee it especially fitting that the receiver should pay the taxes. There were two mortgages upon the premises involved; the complainant filed his bill to foreclose the second mortgage and secured the appointment of the receiver; the trust deed under which the receiver was appointed provided that the court could authorize him to pay taxes, and the order appointing him directed him to pay taxes; subsequently, at the instance of complainant, an order was entered to pay to the University of Chicago, the holder of the "first mortgage, $750 a month on account of past due interest; in his petition for this order the complainant stated that the University had expressed a willingness to refrain from foreclosing its first mortgage if such payments were made out of the income received by the receiver; this arrangement apparently was carried out for about a year, but in June, 1932, the complainant made a motion asking the court to order the receiver to cease making the monthly payments for the reason, as stated in the petition, that the rentals had decreased and that in order to have the receiver properly administer his duties, “it is necessary to maintain a balance for the payment of taxes” and other expenses that will be charged against the premises; an order was accordingly entered. In April’ 1932, complainant had obtained an order authorizing the receiver to make a partial payment of $1,000 on the 1930 taxes.

September 15, the University filed its petition in the instant case, stating that it represented the owner of the notes secured by the first mortgage; that it had filed a bill to foreclose and asking for leave to make the receiver in the second mortgage foreclosure a party defendant in the suit to foreclose the first mortgage; leave was granted; September 21, the University moved that the receivership ordered at the instance of complainant be extended to cover the foreclosure proceedings brought by the University, and an order to this effect was entered.

September 30, the receiver filed a report and account showing that he had a balance on hand of $2,649.47, and thereupon, on motion of the University, it appearing that the general taxes for the years 1929 and 1930 in the amount of approximately $4,888.06 were due and unpaid, it was ordered that the balance of $2,649.47 in the hands of the receiver should be by him applied on the general taxes then due and unpaid. It will thus be seen that the receiver was appointed for the specific purpose, among others, of paying the taxes out of any rents and profits coming to his hands. The order extending the receivership to the first mortgage foreclosure proceedings shows that the receivership was not for the sole benefit of the second mortgagee. This being so, it was proper for the receiver under the order of court to apply the funds in his hands to the payment of taxes. As between the rights of the second mortgagee to the funds, the lien of the State for taxes was prior. Cross v. Will County Nat. Bank, 177 Ill. 33; Palmer v. Lewistown Nat. Bank, 238 Ill. App. 492.

Complainant says that he had no notice of the motion by the University for the receiver to pay taxes, as is required under Bule 21 of the" superior court, which rule says that all'parties in interest are entitled to notice of such motion. In the order permitting the University to make the receiver a party defendant, in the order extending the receivership, upon the filing of the receiver’s report, and in the order directing the receiver to apply the balance in his hands on account of taxes, it is recited that due notice was given to all parties.

Even if complainant did not have notice, he thereafter had a full hearing upon the merits of the order in question. Within three days after the order was entered, after other' counsel had been substituted for complainant, the court permitted him to file a petition seeking to vacate the order of September 30; answers were filed and a hearing had; the motion to vacate was denied. In Farmer v. Fowler, 288 Ill. 494, it was argued that a certain order had been entered without notice, contrary to the rules of court. It was held that as the record showed there was a hearing upon the merits upon a motion to set aside the order, it was immaterial whether the trial court violated its rules requiring notice. So in the instant case, complainant was heard upon his motion to vacate the order and was, therefore, not prejudiced by any failure in regard to rules with respect to the first order.

The order directing the receiver to apply the funds in his hands on account of taxes past due was properly entered by the chancellor and complainant’s motion to vacate this order was properly denied.

The order of the superior court is affirmed.

Affirmed.

Matchett and O’Conhor, JJ., concur.


author: Mr. Justice Matchett

text:
    Party Cab Company for the Use of Minnie E. Hill, Plaintiff in Error, v. Central Mutual Insurance Company, Defendant in Error.
    Gen. No. 36,479.

      Opinion filed May 8, 1933.
    Rehearing denied May 20, 1933.
    Cohen, Tomas & Cohen, for plaintiff in error; George B. Cohen, Irwin H. Goldman and Mordecai Shulman, of counsel.
    William Levine, for defendant in error.
   Mr. Justice Matchett

delivered the opinion of the court.

By this writ plaintiff, who brought an action in the name of the Party Cab Company for her use, seeks to reverse an order entered on motion of defendant which dismissed her suit, as alleged, for failure to file a copy of the instrument sued on as provided by section 32 of the Practice Act, Cahill’s St. ch. 110, H 32 (Smith-Hurd Ill. Rev. Stats. 1931, ch. 110, sec. 32). The order was entered on October 15, 1932, and a motion of plaintiff to vacate the same was entered and afterwards denied by the court on October 21, 1932.

The declaration was filed September 1, 1932. It alleged that on April 29, 1931, the Party Cab Company was the owner of certain cabs and engaged in operating them in the streets of the City of Chicago and in carrying persons indiscriminately for hire; that on that date plaintiff was run down by one of these cabs at the intersection of 39th street and Vincennes avenue in Chicago and sustained personal injuries, ■ through the fault of the Party Cab Company in the operation of one of its motor vehicles while engaged in the transportation of passengers for hire upon the streets of Chicago; that she thereafter filed suit in the superior court of Cook county, and that on July 9, 1932, she recovered a judgment against the Party Cab Company in said cause on account of the injuries so sustained for $1,200 and costs; that the judgment was never vacated and is still in full force and effect; that the execution was issued and served on the Party Cab Company on July 27, 1932, but that the judgment, or any part thereof, has not been paid.

The declaration further alleges: 11 The Party Cab Company at the time of said occurrence in question had all of its motor vehicles or taxicabs covered by bonds in the Central Mutual Insurance Co., Inc., defendant, under Section 42A of the Motor Vehicle Act, of the State of Illinois, that is to say, that all of the cabs in operation by the Party Cab Company on April 29, 1931, and in operation on the streets of the City of Chicago on that date were bonded by the said defendant company in the penal sum of Twenty-five Hundred ($2500.00) Dollars each in accordance with Section 42A of the Motor Vehicle Act of the Statutes of the State of Illinois. Each of said bonds is conditioned that the owner of said motor vehicle will pay all final judgments recovered against such owner for any injury or death resulting from the negligence of such owner or its agent in the operation of such motor vehicle, provided that the maximum payment shall not exceed Twenty-five Hundred ($2500.00) Dollars, and said defendant company was the surety on each of said bonds. Plaintiff states that Minnie E. Hill did not and the Party Cab Company claims it did not have the motor number or the license number of the cab that caused her injury, but states that said cab that caused the injuries to the said Minnie E. Hill was owned and operated by the Party Cab Company as established by the verdict of the jury and the judgment of the court on that verdict, and the judgment of the court is final and conclusive that the taxicab that caused the injuries to Minnie E. Hill at the time and place in question was one of the cabs of the Party Cab Company, and plaintiff says that the cab was covered by one of the bonds of the defendant company in accordance with the aforesaid Statute made and provided, with the defendant company as surety, and that said bond was in full force and effect at the time of the accident with premiums paid, and all conditions performed required to be performed by the Party Cab Company, and that due and timely notice was given the defendant company of the accident to Minnie E. Hill, and of the claim of said Minnie E. Hill and of the said suit.”

The declaration also averred that a demand had been made on the defendant company to pay the judgment and the demand was refused.

The record requires a construction of section 32 of the Practice Act as amended by an act of 1907, Cahill’s St. ch. 110, ft 32. It provides in substance that if the plaintiff shall not file his declaration together with a copy of the instrument of writing or account on which the action is brought (“in case the same be brought on a written instrument or account”) ten days before the beginning of the term of court at which the summons is returnable, the cause shall be continued unless the parties agree to have a trial; that “if the declaration and copy of the instrument of writing or account, on which the action is brought, shall not be filed ten days before the second term of the court, the defendant shall be entitled to a judgment as in case of a non-suit.”

It is the contention of defendant that the filing of the copy of the instrument upon which suit is brought is mandatory, and that the failure to file a copy of the instrument sued on gives to defendant an absolute right to a judgment as in case of non-suit. Defendant cites to this point Staley v. Illinois Threshermen’s Mut. Ins. Co., 246 Ill. App. 279, where section 32 of the Practice Act, Cahill’s St. ch. 110, If 32, was construed. That suit, which was in assumpsit, was brought to the September term, 1925, of the circuit court of McLean county, and the suit was based upon a fire insurance policy. Plaintiff filed a declaration but did not file a copy of the policy and at the September term defendant appeared and made a motion for a continuance on account of plaintiff’s failure to file a copy of the policy. There were no further proceedings at the November term, 1925, or at the February or April terms, 1926, but on September 15, 1926, during the September term, plaintiff filed a copy of the instrument, and defendant moved to dismiss under the statute. The motion was granted and judgment for costs entered, and plaintiff appealed. The opinion of the court points out that prior to 1907 the act did not contain in its second part the words, “and copy of the instrument of writing or account on which the action is brought,” but that those words were inserted by amendment to the section by the legislature at its session in 1907; that historically the act was originally passed in 1827; that prior to the amendment in 1907 it had been held that when no declaration was filed 10 days before the second term of court, defendant was entitled to a judgment as in case of non-suit, and that the trial court had no right to enter any order other than one of non-suit, if that order was requested; that by the amendment of 1907 authorizing a dismissal of the suit unless the copy of the instrument of writing or account on which the action was brought was filed at the same time, or by the second term, it was the intention of the legislature to render the filing of a copy 10' days before the second term of the court mandatory, and that otherwise the defendant would be entitled to judgment as provided in the statute. The judgment in that case was affirmed.

It is contended by this defendant that the decision in that case is controlling here. To that proposition we cannot assent for several reasons. In the first place, it is to be noted that the language of section 32, Cahill’s St. ch. 110, 32, expressly limits the cases in which a copy shall be filed to that class of cases in which the action is brought upon a written instrument or account. There is, of course, no claim here that this action is brought upon an account, and we think that, as a matter of fact it may plausibly be argued that the basis of action disclosed in this declaration is not a written instrument but the provisions óf the statute by virtue of which defendant is alleged to be liable. It may be reasonably argued, we think, that this provision of section 32 with reference to the filing of a copy is not applicable where, as here, the suit is brought by a plaintiff who bases her action not upon a contract to which she is a party, but rather upon the statutory provision which gives her the right to recover on the bond.

Moreover, the clause inserted in this statute by the amendment of 1907 had existed substantially as a rule of practice by virtue of the statutes of this State for about 100 .years, during which time it had been repeatedly construed by the decisions of the courts. It may be fairly assumed that the legislature in adopting it as a part of an amendment to this section intended to adopt it as it had been construed. Certainly, there is nothing in the language of the section which indicates a contrary intention upon the part of the legislature.

The courts have declared what the purpose of the provision is. In Benjamin v. Delahay, 2 Scam. (Ill.) 574, it was held that the object of this provision was to give to defendant notice of the particular demand which plaintiff sought to recover. In Kimball v. Kent, 2 Scam. (Ill.) 217, it is found that this provision was formerly section 6 of the Practice Act of 1827 (Gale’s Stats. 530), and it was held erroneous to dismiss an action for failure of plaintiff to file a copy without first entering a rule upon him to comply therewith. In Bogardus v. Trial, 1 Scam. (Ill.) 63, it was held that the copy was no part of the declaration, and a long line of cases follows that decision. Such has always been the construction of the provision since it was inserted as a part of section 32 by the amendment of 1907, as shown by the case of Alton Banking & Trust Co. v. Gray, 347 Ill. 99, where the court re-announced that rule and held that only by bill of exceptions could a court of review be informed of the contents of the copy. Other cases hold that the object of the statute is as fully attained by a literal description of the instrument in the declaration as by the filing of a copy. In Phenix Ins. Co. v. Stocks, 149 Ill. 319, it was held in an action on an insurance policy that where a policy was set up in one count of the declaration it was not necessary to attach a copy of the application which was presumed to he in the possession of the defendant. In Yeomans & Shedd Hdw. Co. v. Silkey, 259 Ill. App. 199, it was held that where a copy was set up in any one of several counts of the declaration, it was ¡unnecessary to file a copy.

Applying the law as stated in these decisions to the facts of this case, it appears that the purpose of the provision is that defendant may have notice of the kind of action he is called upon to meet. In this case the declaration does set up, not an exact copy it is true, but all the substantial provisions of the statute and the bond upon which plaintiff relies. The declaration does not state the number of the particular cab by which plaintiff was injured for the reason that she does not know the number. This statute could not have intended that plaintiff should be required to give information concerning matters of which she knows nothing and of which defendant is presumably fully informed. A rule of law does not apply where the reason for the rule does not exist. Of course, it is not reasonable to suppose that it was the intention of the legislature to put plaintiff out of court for failing to file a copy of an instrument which is not in her possession but which is in the possession of defendant.

We hold the rule to be inapplicable to facts such as appear here in this case; that the court erred in dismissing plaintiff’s cause of action, and that the order should be reversed and the cause remanded for further proceedings consistent with this opinion.

Reversed and remanded.

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


text:
    Fred E. Hummel, Receiver of Motor Transit Mutual Insurance Company, Appellant, v. Paul J. Alwart et al., Appellees.
    Gen. No. 36,510.

      Opinion filed May 8, 1933.
    Rehearing denied May 20, 1933.
    Wbtten, Pegler & Dale, for appellant.
    Bippus, Rose & Burt, for certain appellees.
   Mr. Justice O’Connor

delivered the opinion of the court.

Fred E. Hummel, as receiver of the Motor Transit Mutual Insurance Company, filed his bill in the circuit court of Cook county seeking to have an $18,000 note, secured by a mortgage on Wisconsin real estate, restored as part of the assets of the insurance company of which he was appointed receiver by the United States district court of the Northern District of Illinois, Eastern Division. The case was referred to a master who took the evidence, made up his report, and recommended a decree in accordance with the prayer of the bill. Exceptions to the report were sustained by the chancellor, the bill dismissed for want of equity, and complainant prosecutes this appeal.

The record discloses that the Motor Transit Mutual Insurance Company was incorporated under the laws of this State to conduct a mutual insurance business; that shortly thereafter another corporation known as the Transit Underwriting Corporation was organized under the laws of this State, whose sole purpose apparently was to conduct and operate the business of the insurance company, and a contract to that effect was entered into between the two corporations. Both corporations occupied the same office in Chicago, and the managing company proceeded to procure motor bus companies and others to take out policies of insurance in the insurance company. So that the insurance company could obtain a license to permit it to engage in the business for which it was incorporated, it was necessary that it procure some assets, as required by the statute, and for this purpose the defendants Paul J. Alwart and Katherine S. Alwart, his wife, on August 1, 1925, made their promissory note for $18,000 payable to the order of Edward T. Smith, due five years after date, with interest at six per cent payable semiannually. The payment of the note was secured by a mortgage given by the makers of the note on real estate in Barron county, Wisconsin. This note and mortgage were given by Alwart to the managing corporation to be turned over to the insurance company, and the note and trust deed were placed in a safety deposit box in Chicago, which conld be opened only in the presence of Alwart or his lawyer, and Rice or Claypool (both being connected with the managing company) and an executive officer of the insurance company. This note and mortgage remained in the safety deposit box for about four years. About the time the managing company turned over to the insurance company the $18,000 note and mortgage and other securities that went to-make up the surplus as a prerequisite to the obtaining by the insurance company of a license to issue insurance policies,- the insurance company gave its “surplus note” for $75,000 to the managing company. The note drew interest at eight per cent per annum, payable semiannually, and contained the following: “which principal and interest shall be repaid only out of the surplus earnings of the corporation at such times and in such amounts as shall be determined by the Board of Directors of the corporation, and shall not otherwise be a liability or claim against the corporation or any of its assets.”

The insurance company had issued a number of policies but apparently made no money after the year 1926, and beginning about 1929 or earlier was in a bad financial way. The defendant Edward T. Smith was a brother-in-law of Alwart’s and employed by him. The defendant Wagner was an employee of defendant Alwart, who was engaged in the coal business. May 6, 1929, defendant Alwart caused Smith and his wife to execute their promissory note for $18,000, payable five years after date to the order of Wagner, with interest at six per cent per annum. On the same date Alwart and his wife deeded the Wisconsin property to Smith and at the same time Smith released the mortgage Alwart had given him on the same property. Smith and his wife on the same date gave a mortgage to Wagner to secure the payment of the last mentioned note. Shortly thereafter Alwart, together with two or more persons who had the right to open the safety deposit box in which the Alwart note and mortgage were kept, opened the box, and the Alwart note and mortgage were delivered to him, and the $18,000 note made by Smith and the mortgage were placed in the box in lieu thereof. There were other transfers, back and forth, of the Wisconsin property but we think it of no importance to detail the evidence on this point because it is clear and undisputed that the property at all times belonged to the defendant Alwart, and that the various transfers, releasing of mortgage, etc., were merely colorable. Neither Wagner nor Smith ever had any interest in the property. Smith never received anything for the note. Alwart himself frankly testified, in referring to the Wisconsin property, “I own all the furniture and everything there. There is no debts on it. So far as the record title is concerned, there is no encumbrance on it, never was, it was always mine. As a matter of fact, those mortgages from Smith to Wagner and these various conveyances, were all without consideration, I did not receive any money. . . . I procured all these various papers to be executed for my convenience. . . . Neither Smith nor Wagner nor Crane had anything to do with drawing up those papers. . . . Crane paid nothing to me for the deed to him, and I paid nothing back to Crane for the deed back to myself. ’ ’

It further appears from the evidence that when Alwart delivered the $18,000 note and mortgage made by himself and wife to the managing company to be turned over by it to the insurance company, he was given stock in the managing corporation and a receipt for the note and mortgage. The receipt recited that the managing company had also received from Alwart a bond of a safe deposit company for $1,000, and provided that the note, mortgage and bond were to be put in the safety deposit box in Chicago, which was to be accessible only to certain designated persons, above mentioned, and that the note, mortgage and bond were to be loaned to the insurance company “for the purpose of creating- admitted assets in accordance with sub-section 8 of Section 9 governing the organization of Mutual Insurance Company in Illinois”; and further, that the insurance company should pay six per cent on the face value of the securities to the underwriting company, and the underwriting company agreed, upon receipt of the interest from the insurance company, to turn the same over to Alwart and that “As a part of the consideration of the loan of said Securities” the managing company was to deliver a certain number of certificates of its stock to Alwart. The receipt further provided that Alwart might withdraw the securities at any time thereafter upon condition that he- notify the managing company in writing that he desired his securities returned, provided, however, that he might not demand more than 25 per cent of them within 90 days, “it being the intention hereof that all of said securities shall on demand, as aforesaid, be returned within one year from the time of the demand, ’ ’ etc. It further provided that if" the securities were returned then Alwart should return a proportionate share of the stock which had been given him in the managing company for the securities; and that, “By mutual arrangement between the parties other securities may be substituted by the Loaner (Alwart) for those above mentioned.”

November 16, 1929, complainant was appointed receiver of the insurance company by the United States district court in an equity proceeding. He was authorized and directed, among other things, to collect the assets of the insurance company. July 2, 1930, a decree was entered by the United States district court in which it was found that the insurance com-party was “solvent np to the end of the year 1926, but that it thereafter continued to suffer losses and was not thereafter possessed of assets equal to the unearned premium reserve and other liabilities,” and that there were outstanding and unpaid claims aggregating $389,317.79 as of November 16, 1929; that the total liabilities on that date amounted to $478,195.26, while the assets did not exceed $68,777.94 some of which was represented by mortgage loans on real estate and on that date there was a deficit of $409,417.32. It was further found that the policy holders were liable to assessment and it was decreed that the maximum liability, by way of assessment, of each policy holder should not exceed an amount equal to 12 times the average monthly premium which the policy holder was obligated to pay.

The evidence further shows that during the time the insurance company was conducting business — a period of more than four years — it made annual verified reports to the insurance department of this State, as required by statute, and these reports show the note for $18,000 and the mortgage securing it executed by the defendant Alwart as a part of the assets of the insurance company. There is also evidence to the effect that the insurance department of the State caused an examination to be made of the insurance company and that the mortgage and note appeared as a part of the insurance company’s assets.

John Bing, an auditor who had been employed by the managing company that was operating the insurance company, and who was afterward retained by the complainant receiver, testified that he made an audit of the insurance company’s books and that the total assets of the company were $82,715.04, the total liabilities $478,195.26, leaving a deficit of $395,480.22 as of November 16, 1929, and that these books showed as a part of the assets of the insurance company Alwart’s note and mortgage. There was further evidence to the effect that Alwart was an officer and director of the managing company whose sole business, as stated, was to manage the business of the insurance company. This was shown partly by the records of the managing company. Alwart denied that he ever acted as treasurer or director of the managing company.

There is further evidence that 252 claims were filed with the receiver in the federal court, aggregating $909,613.65, that the assets received by the receiver were $68,777.94, and that 66 of the claims were filed by the policy holders and 186 by other creditors.

Section 9, chapter 73 (Cahill’s Statutes) provides that an insurance company such as the insurance company involved in this case, must be licensed before it can transact any business; and section 19 of the Act, provides that any director, officer or member or any other person of a mutual insurance company may advance to the company money necessary for the purpose of its business so as to enable it to comply with the requirements of the law; and that such moneys “shall not be a liability or claim against the corporation or any of its assets, except as herein provided, and shall be repaid only out of the surplus earnings of such corporation.” It is conceded that the statute required the insurance company in question to have certain “admitted assets” before it could be licensed to transact business. To make up a part of these assets defendant Alwart delivered his $18,000 note and mortgage in question, and it will be conclusively presumed he knew the provisions of the law; and having given the note and mortgage to enable the company to obtain from the state a license to do business, after obtaining which the company proceeded to conduct its business, he will not now be permitted to say that he had a right to withdraw the note and mortgage, because section 19, above quoted from, expressly provides that any contribution made to the assets of an insurance company is not to be paid except out of the surplus earnings of the company. In the instant case, there being no surplus, the withdrawal of the note and mortgage was unwarranted and therefore the provision in the receipt given to Alwart by the managing company, which provided that he might withdraw the securities under certain conditions, was contrary to law and void.

Nor is there any merit in his contention that there was no consideration moving to him for the note and mortgage. The receipt given to him by the managing-company, to whom he directly delivered the note and mortgage, expressly provided that he was to be paid six per cent interest on the face value of the securities, and that he was to be given stock in the managing company as a part of the consideration for the note. And the evidence shows such stock was afterward given to him. The fact that he later turned back the stock does not tend to show that he received no consideration for the note and mortgage. The removal of the note and mortgage from the safety deposit box and the delivery of them to Alwart, as above stated, was wholly unwarranted for the further reason that no such authority was even attempted to be given by anyone representing the insurance company.

The defendant also contends that there was no competent evidence that the insurance company was- or is insolvent, and in support of this it is said that when the books of the insurance company were produced before the master no one testified to their correctness, and that without the books the evidence is entirely insufficient to show that the insurance company was insolvent at any time. It is true that no one testified that the books were true and accurate and therefore they were not admissible in evidence; but the fact remains that representatives of the insurance company for a period of three years made verified annual reports to the state insurance department, as the statute required, and took their information from those very books. The decree entered by the United States district court expressly finds the insolvency of the insurance company, and the fact that defendant Alwart was not a party to that proceeding in no way affects the question. The court in that case had jurisdiction of the proper parties and the subject matter, and it was its duty to find whether the company was solvent or insolvent. Defendant was not a necessary party, and the decree of that court finding that the company was insolvent is an adjudication of that question.

The contention of defendant Alwart that the complainant receiver has no greater rights than the insurance company, and that since the insurance company could not recover on the note and mortgage the receiver is unable to do so, is also without merit. As stated, Alwart caused the note and trust deed to be made and delivered to- the insurance company for the purpose of creating the appearance of assets to enable the insurance company to obtain a license to transact its business. Under the evidence as above set forth, Alwart is estopped to question the right of the receiver to recover on the note and mortgage in this case. (See Golden v. Cervenka, 278 Ill. 409.)

Counsel for the defendants say that a by-law of the insurance company provides that “The maximum contingent liability of members shall be twice the premium charged of any calendar year,” and that- the form of policy issued by the insurance company contains a similar provision. Counsel then say that the Mutual Insurance Company has no capital stock and consequently no stockholders; that its members are policy holders associated together for the purpose of insuring themselves against a certain class of losses covered by the policies; that the policy holders have the right at the annual meeting to elect directors, and by the terms of the by-laws and policies they bound themselves to meet the. combined losses by assessment of not more than double the annual premium obligations. It is argued therefore that ‘1 The policy holders are the insurance company in this case, and. it adequately appears from the record that they are attempting to collect from Alwart a large sum of money to divide among themselves”; and that if the policy holders paid their own moral and legal obligations under the policies, the company would not be insolvent. We have heretofore pointed out that there are many creditors of the insurance company who are not policy holders. Moreover, it is nowhere pointed out by counsel for Alwart that the obligation of policy holders can be paid only out of moneys derived from assessments against the policy holders. Nor is there any statement or argument made as to why the statute requires that a reserve fund be provided before a mutual insurance company is licensed to transact business. We think the purpose of the statute in requiring this fund to be obtained before a mutual company is authorized to issue policies is for the protection of the policy holders, as wréll as any other creditor of the insurance ■ company. In fact we are of the opinion that these assets are obtained primarily, if not solely, for the benefit of the future policy holders.

We hold that Alwart is personally .liable on the note according to its terms, that the mortgage is valid and binding, and that complainant is entitled to the relief prayed for in his bill of complaint as amended.

The decree of the circuit court of Cook county is reversed and the cause remanded with directions to enter a decree in favor of the complainant as prayed for in his bill of complaint as amended.

Reversed and remanded with directions.

MoSurelt, P. J., and Matohett, J., concur.


text:
    First Union Trust and Savings Bank, Appellee, v. Robert Sherman Marshall et al., Defendants. Appeal of Marcia Vetes Mooney et al., Appellants.
    Gen. No. 36,527.
    Opinion filed May 8, 1933.
    Fyffe & Clarke and Charles H. Goggih, for appellants ; John Harrihgtoh, Charles H. Goggih and A. E. Butterfield, of counsel.
    White & Brewer, for defendants George Gorham Hester, Helen Virginia Hester King, Ezra Gorham Hester and Mabel Hester.

      B. L. Farmer, for appellee defendants Alexander M. Blair, Milton Marshall and Mary Wheeler.
   Mr. Justice O’Connor

delivered the opinion of the court.

Complainant, the First Union Trust and Savings Bank, as trustee named in the last will and testament of Anna E. Marshall, deceased, filed its bill to construe the residuary clause of the will, which is as follows: “All the rest, residue and remainder of such property, including any lapsed bequests, shall be divided in equal parts among the nephews and nieces of my said husband, then living, and the children or children of children, if any, of such as may be dead, per capita and not per stirpes.” The case was heard before the chancellor and a decree entered. Some of the defendants being dissatisfied with the share of the property awarded to them, prosecute this appeal; others of the defendants who were to receive nothing under the decree have assigned cross-errors. The complainant, the trustee designated in the will, apparently with a view of being entirely impartial, has taken no part in this court. The evidence, which is uncontradicted, shows, and the court found, that there were seven living nephews and nieces, 10 children of four deceased nephews and nieces, and two grandchildren of such deceased nephews and nieces, who were entitled to share in the property disposed of by the testatrix in the residuary clause above quoted, and that the residue of the estate should be divided among these 19 persons in the following proportions: Seven-elevenths to the seven living nephews and nieces in equal parts and four-elevenths equally among 10 children and two grandchildren of deceased nephews and nieces. There were other grandchildren of the four deceased nephews and nieces whose parents were living, and it was held by the chancellor that they had no interest in the residue of the estate. Four of these grandchildren have assigned cross-errors.

Of course the purpose in construing a will is to ascertain the intention of the testatrix, and in the instant case the intention of the testatrix must be determined solely from the language she used in. the will; there is no extrinsic evidence that would throw any light on her intention. We think the residuary clause is free from ambiguity. It provides that the property disposed of by that clause “shall be divided in equal parts among the nephews and nieces of my said husband, then living, and the children or children of children, if any, of such as may be dead, per capita and not per stirpes.” By this language the property disposed of by this clause should be divided in equal parts, among: (1) The living nephews and nieces of her deceased husband; (2) among the living children of any nephew or niece that had died, and (3) among the grandchildren of any deceased nephew or niece. When these classes of persons are ascertained the property is to be divided equally among them. This is what the language says, and as if to emphasize this fact the testatrix then added that the division was to be made “per capita” and not “per stirpes.” The phraseoper capita means that the persons designated are to share by heads — share and share alike; while the phrase per stirpes signifies that particular descendants shall take among, themselves the share of their deceased parent.

In the instant case if the testatrix had transposed the two phrases “per capita” and .“per stirpes” this undoubtedly would cause us to follow the construction placed upon the will by the chancellor, as this transposition would be more than “a very faint glimpse of a different intention” of the testatrix. It may well be that the scrivener, in drawing up the will, inadvertently transposed the two phrases, but in the absence of any evidence we must construe the will as we find it.

While each of the phrases per capita and per stirpes has a well defined and understood meaning and may properly be used when carefully thought about, yet we think these phrases are sometimes misapplied, often invite confusion, and the use of them ought to be discouraged ; similarly, the use of the Latin phrases in para delicto, res ipsa loquitur, in Tiaec verba, res gestae, and others; and while none of these has such a well defined meaning as the phrases per capita and per stirpes, yet we are of the opinion that the use of these and similar phrases is often harmful because it invites confusion and uncertainty. This is shown by briefs and arguments of counsel and in the opinions of courts. Dean Wigmore, in vol. 3 of his work on Evidence (2nd ed.) sec. 1767, discusses the history and use of the phrase res gestae and concludes that it should never be used; that “No rule of evidence can be created or applied by the mere muttering of a shibboleth.....An empty phrase so encouraging to looseness of thinking and uncertainty of decision.” We quoted that section with approval in Martin v. Turek, 227 Ill. App. 379, and are of the opinion that what the author states is more or less applicable to other Latin phrases such as we have above mentioned.

The rule we have applied in construing the residuary clause is in accordance with the law as announced by our Supreme Court in many cases. Some of these cases are Pitney v. Brown, 44 Ill. 363; McCartney v. Osburn, 118 Ill. 403; Richards v. Miller, 62 Ill. 417; Carlin v. Helm, 331 Ill. 213; Northern Trust Co. v. Wheeler, 345 Ill. 182.

In the Pitney case the question was whether the will provided that a distribution should be made per capita and not per stirpes. The will provided: “The balance remaining of said fund I hereby direct shall be equally divided between the children of my late brother, Mahlon Pitney, and my brother-in-law, William H, Brown, ... a large portion of my property having been received through his father and the father of my late wife, Betsey H. Pitney.” There were three children of Mahlon Pitney, and the question was whether the residue was to be divided one-half to Brown and the other hklf to the three children, or whether it was to be divided equally among the four. The court held that it was to be divided equally among the four, and said (p. 366): “The language is susceptible of either interpretation; and, if the question were a new one, it would be difficult of decision, though we are inclined to thing that equality per stirpes would be the more natural construction. But the point has so often been decided by the courts, both of England and of this country, that there is an established canon of interpretation in regard to these words, from whose authority we do not feel at liberty to depart. With a long line of precedents all pointing in one direction, and on a question of admitted doubt, it is our duty to follow the rule, even if questioning its soundness.

“The rule is thus stated by Jarman (vol. 2, p. Ill): ‘When a legacy is to the children of several persons, they take per capita and not per stirpes. The same rule applies when a bequest is made to a person, described as standing in a certain relation to the testator and to the children of another person, standing in the same relation; as, to my brother A and the children of my brother B, in which case A takes only a share equal to that-of one of the children of B.’ ”

In the McCartney case, supra (118 Ill. 403), the construction of a residuary clause of a will was involved. It provided that the residue was “to be equally divided between the heirs of the said Henrietta that may be living at the time of said division, and the said Harry Gr. McCartney, each to share and share alike.” Harry Gr. McCartney was an only child of the deceased, Jennie W. McCartney, and Henrietta was a sister of the deceased who died leaving children surviving. The controversy was whether Harry G. McCartney was to receive one-half the residue and the surviving children of Henrietta the other half; or whether Harry G. McCartney and the surviving children should each receive equal parts of the residue. The court quoted the rule from Jarman on Wills which was referred to in the Pitney case, supra, and held that it should be divided per capita.

In the Richards case, supra (62 Ill. 417), the court adhered to the rule applied in the Pitney case, and on page 425 said: “The words, too, ‘equally,’ or ‘share and share alike,’ or ‘to be equally divided,’ import an intention. When they are used in a will they mean a division per capita.”

In the Carlin case, supra (331 Ill. 213), the will provided that the residue of the property should be divided equally between the testator’s lawful heirs, — “I mean by my lawful heirs, my daughter Aura F. Hecox and her children, and grandson Harry B. Helm.” At the death of the testator Aura F. Hecox had two children and Harry Helm had none. The court held the property should be divided into four equal shares among the four persons mentioned. A number of authorities are there discussed and the rule announced in the Pitney case adhered to.

• In Northern Trust Co. v. Wheeler, supra (345 Ill. 182), the trust company was trustee under the will. The trust company as trustee filed its bill praying for instructions as to the persons to whom the residuary estate should be distributed. The provision of the will which disposed of the residue of the estate is as follows : “I direct said trustee to turn over and distribute in equal parts to my brothers who may be living at the time of such distribution, and to the descendants of such of them (including descendants of my said brother, George Henry Wheeler) as may have died leaving any descendant or descendants him or them surviving, the descendants of a deceased brother in each case to take per capita and not per stirpes the share to which such deceased brother would have been entitled if living.” The question was whether all descendants of a deceased brother of whatever degree were entitled to an equal distribution per capita, or whether the rights of the descendants accrued per stirpes. The court, after reviewing some of the authorities said (p. 188) : “In this country the decisions of the courts of the different States are not in harmony.” A number of authorities are then discussed, and continuing the court said (p. 191): “What was the intention of the testator as expressed in the words of his will? When that intention is ascertained there is no room for presumption. If the language of the will indicates the intention of the testator that the living descendants of each of his brothers who should be dead at the time of distribution should take per capita and not per stirpes, that intention must be given effect. . . . The Illinois law favors such a construction of a devise to descendants as will cause the division among descendants per stirpes and not per capita, but it is the intention of the testator which must gov- / ern, and when his will directs that the descendants shall take the share to which the ancestor would be entitled if living, per capita and not per stirpes, we cannot say that the share shall be taken by the descendants per stirpes and not per capita or in part per stir- pes and in part per capita.” The court adhered to the rule announced in the Pitney case, and in referring to the case of Proctor v. Lacy, 263 Mass. 1, said: “the direction that an estate be divided equally per capita is not consistent with but opposed to a division of the estate per stirpes.” And on page 196: “Counsel argue that nothing of any substantial nature is added to the words ‘per capita’ by the addition of the words ‘and not per stirpes.’ Perhaps not, yet they seem to emphasize the intention of the testator.”

For the reasons stated, the decree of the superior court of Cook county is reversed and the cause remanded with directions to enter a decree dividing the residue into 19 equal parts, to be distributed one part to each of the seven living nephews and nieces; one part to each of the 10 children, and one part to each of the two grandchildren, as above mentioned.

The decree of the superior court of Cook county is reversed and the cause remanded with directions.

Reversed and remanded with directions.

McSitrely, P. J., concurs.

Matchbtt, J.: I concur in the result.