author: Mr. Presiding Justice Shurtleee

text:
    M. F. Dunlap, Defendant in Error, v. Charles M. Peirce et al., Plaintiffs in Error.
    Gen. No. 8,172.

      Opinion filed January 25, 1928.
    H. J. Thompson, George O. Weaver and Charles M. Peirce, for plaintiffs in error.
    John J. Reeve and Bellatti, Samuell & Moriarity, for defendant in error.
   Mr. Presiding Justice Shurtleee

delivered the opinion of the court.

This suit is a proceeding by bill in equity in the circuit court of Pike county brought by M. P. Dunlap, defendant in error, to the April term, A. D. 1926, to foreclose a mortgage which was executed by plaintiffs in error, Charles M. Pierce and Ella B. Peirce, and made to Otis E. Taylor and William H. Petefish, dated December 17, 1924, given to secure notes of the same date, aggregating $90,000, payable at different times, the last note being payable July 1,1929, and all having coupon notes attached for all the interest due respectively on the notes. The mortgage covered 1,000 acres of land, more or less, in Pike county, Illinois.

The bill alleged that the notes and mortgage had been executed by the makers and delivered to the payees and that the mortgage had been duly recorded in Pike county, Illinois, and that the notes and mortgage had been duly assigned by the said payees to M. F. Dunlap. It was provided in each of the notes and also in the mortgage that if default was made in the payment of any interest coupon when due, then the principal notes should immediately become dué and collectible. The notes were made to draw interest from January 1, 1925, which was payable annually. The bill alleged that the interest coupon notes due January 1, 1926, were not paid, and that the holder, elected to declare all of the principal notes due and filed his bill to foreclose the mortgage.

It appears from the answer and cross-bill of plaintiffs in error that on December 13,1924, Otis E. Taylor and Effie Taylor, his wife, as parties of the first part, had entered into contract in writing, under seal, with the plaintiffs in error, Charles M. Peirce and Ella B. Peirce, his wife, as parties of the second part, by the terms of which the parties of the first part were to convey to the said Charles M. Peirce 1,000 acres of land, more or less, particularly described in Atlas township, Pike county, Illinois, said lands being subject to one first mortgage for $60,000, bearing date August 12, 1924, together with the interest accruing thereon after the first day of January, 1925; and the parties of the second part covenanted to convey to the said Otis E. Taylor of Morgan county three separate tracts of land, situated in the county of Mississippi and State of Missouri, with incumbrances as follows: 125.93 acres, subject to one first vendor’s lien of $9,927.40, bearing interest at 6 per cent per annum; the second tract of 597 acres, subject to one first lien secured by trust deed of $53,800 to be due April 1, 1932, bearing 6 per cent interest per annum, and the third tract of 260 acres, subject to one first lien secured by trust deed of $24,000 to be due April 1,1932, and bearing interest at the rate of 6 per cent per annum.' The contract recites: “and there being accrued interest and taxes on said premises unpaid, it is mutually agreed by and between the parties that the residue hereinabove specified that the deeds are made subject to is to be credited by party of the first part on notes maturing July 1, 1928, hereafter to be given by party of the second part.” It was agreed that the interest on said indebtedness and taxes and assessments were to be figured to January 1,1925, and in further consideration of the. conveyances the second parties (plaintiffs in error) further agreed to make and assign notes to the amount of $90,000 secured by a second mortgage on the tracts of land in Pike county, Illinois, amounting to 1,000 acres, as of date January 1,1925, said notes to be for the following amounts and to be due at the following dates: $10,000, January 1, 1927; $5,000, January 1, 1928; $5,000, January 1,1929, and the residue to be in one note to be due July 1, 1929. All of said notes to draw interest at the rate of 6 per cent per annum and all to be secured by one second mortgage instrument covering said lands. There was a further clause as to each assigning insurance policies and it was further agreed that each of the respective parties would furnish an abstract of title, brought down to date, showing merchantable title in them as thereinbefore provided, subject to liens and incumbrances. The contract contained further clauses as follows:

“It is further mutually agreed that the lands being conveyed by first parties has had a question as to merchantable title heretofore raised and money on a former deal by party of the first part has been held to have a bill filed in quieting title to said property. That parties of the second part shall have the option to have the title quieted or in case they deem it best to pass the errors and whatever money is paid to party of the first part for waiver of the bill to quiet title shall be divided between party of the first part and party of the second part hereto, but if party of the second part elects so to do party of the first part is to put the quiet title suit or cause the quiet title suit to be put through at his expense and without cost to party of the second part, party of the second part to consent that his name as owner may be used in the quiet title suit.
“It is further mutually agreed that this deal is to be closed at the office of C. M. Peirce in Bloomington by the delivery of deeds within five days of the date hereof and that the residue of this'agreement outside of the exchange of deeds shall be closed at the office of C. M. Peirce in Bloomington, not later than the first day of January, 1925.
“It is further mutually agreed between the parties that whereas party of the first part has a $20,000 second mortgage on the above described thousand acres of land that his deed shall be subject to said additional $20,000 second mortgage and that party of the second part shall retain $70,000 in notes of the $90,000 that he is to give until the second mortgage is settled and released and the release shown upon the records.”

It further appears from said answer and cross-bill that the deeds were executed and exchanged, and that plaintiffs in error executed the notes and mortgage to the amount of $90,000 in securities which were placed in the hands of plaintiff in error Charles M. Peirce, all of which was done within five days after the execution of the contract. The notes for $90,000 and the mortgage were all signed and executed by both plaintiffs in error, Charles M. Peirce and Ella B. Peirce.

It further appears that the parties of the second part elected not to take the title to the Pike county lands in its then condition, but required a merchantable title, as shown by the abstract, and that the first parties were not able to complete “the residue of the agreement” on or before January 1, 1925, as they had covenanted to do. In the meantime, plaintiff in error had loaned to Taylor $70,000 of the notes, at Taylor’s request, to take them and show, as he said, to some parties in Jacksonville, and Taylor had agreed to return the notes but did not do so. This led to what is called a “supplemental” agreement entered into between said Otis E. Taylor, William H. Petefish and Claude C. Petefish, parties of the first part, and plaintiff in error Charles M. Peirce* party of the second part, under date of January 17, 1925, reciting the former agreement and reciting that the parties of the first part “have not at this time a merchantable title for the 1000 acres of land situated in Pike County, . . . and whereas the said 1000 acres is subject to a second mortgage originally for the sum of $22,688.88, and whereas the same is unpaid and is being held by agreement between parties of the first part . . . and an agreement from the former owner of this land from whom they obtained title, Harry L. Nichols of Pike County, Illinois, and whereas said Nichols is filing a bill to quiet title to said premises, ’ ’ etc.

It was further recited in the supplemental agreement that: “whereas the contract of December 13, 1924, so far as deeds are concerned, has been executed and delivered and placed upon record and whereas party bf the second part has executed $90,000 in notes secured by a second mortgage on said 1000 acres and in order that nobody may suffer any loss at all it is agreed supplemental to said agreement of December 13th, that said $90,000 secured by second mortgage on said 1000 acres shall be deposited in the hands of the Farrell State Bank of Jacksonville, Illinois, and by said bank held with a copy of this supplemental agreement until they are directed to release and deliver the same to parties of the first part, Otis E. Taylor, William H. Petefish and Claude C. Petefish, and party of the second part agrees on his part that when the title to the said premises is quieted and abstract furnished showing merchantable title and time afforded him to examine same of thirty days after abstracts are furnished him and in his possession for said examination in which time party of the second part agrees by written order to said bank to release said notes, providing parties of the first part have complied with their agreement in toto of December 13, -1924.”

There was a further provision in the agreement that the lands were in the possession of three tenants and that it required some one to collect the rents and supervise the management of said farms until the time that said notes could be released, and it was therefore “mutually agreed by the parties that F. J. Blackburn of Jacksonville, Morgan County, Illinois, shall act as agent, supervise and have power to rent, collect and receive all rents during the period of time as per this contract contemplated and it is agreed that such rents as he shall receive and collect shall be first applied in interest on first mortgage of $60,000 to the Prudential Life Insurance Company accruing from and after the first day of January, 1925, such taxes and special assessments as become due after January 1, 1925, and if any residue remains after paying for repairs or any seed that he is compelled to furnish to tenants shall be applied on interest on said $90,000 notes and held by him until the notes are released in accordance with this agreement.”

It was further ágreed by the parties that all expenses of the receiver or of the bank as custodian, by agreement, of the notes should be borne by the first parties to the supplementary agreement. This agreement was signed by the parties recited, but it is to be noted that plaintiff in error Ella B. Peirce was not a party to the supplementary contract and is not now liable on said notes.

The notes, secured by mortgage, were turned over to the Farrell State Bank, which accepted the trust and receipted for the instruments in accordance with the supplemental agreement, and agreed to hold the same without expense to plaintiffs in error.

It was further set out in the answer and averred in the cross-bill that said notes by fraud had come into the possession of said complainant (defendant in error), and that the said Taylor, William H. Petefish and Claude C. Petefish had never carried out their said agreements, and that plaintiffs in error or either of them had never, in writing or in any other manner, consented to or directed the release of said notes, and that the same had never been brought about by any legal proceedings against plaintiffs in error.

It was further set out and averred that the original contract and the supplementary contract made by one of the plaintiffs in error with Taylor and with Taylor and the Petefishes were effected and induced by the fraudulent representations of said Taylor, upon which plaintiff in error Charles M. Peirce relied and had no other information. It was averred that Taylor represented to plaintiff in error that the. Pike county land had a cash market value of $250 per acre and could be sold for that, and that it had changed, hands recently for over $200 an acre cash; that the lands were well drained and the drainage had good outlets; that said Taylor in making said original agreement represented that he was the owner of the Pike county lands and had plenty of means at his command, and agreed to pay up at once about $24,700 in interest, taxes and assessments due on the Missouri lands owing by plaintiff in error Charles M. Peirce, and that foreclosure proceedings were about to be commenced therefor against plaintiff in error, which would greatly damage and injure his credit; that there was not 1,000 acres in the Pike county lands, but only about 945 acres; and it was further averred that Taylor and Petefish, in carrying out said suit to quiet title, had caused a judgment to be entered against plaintiff in error for the sum of $3,000 for attorney’s fees and costs to the great damage ofi plaintiff in error.

It was further averred that plaintiffs in error had suffered great damage between December 20,1924, and January 17,1925, by said Taylor and Petefish offering for sale and attempting to sell said $90,000 in notes at the various banks in Bloomington where plaintiffs in error resided and where Charles M. Peirce did business, with the result that said Peirce had various loans called and was compelled to secure others and was greatly injured in his business.

Plaintiffs in error further averred that neither defendant in error, nor Taylor, nor either of the Pete-fishes nor any other person has ever carried out the terms of the agreements made by them with plaintiffs in error, and that they have not at any time furnished an abstract showing merchantable title to the Pike county lands, nor have they ever put plaintiffs in error in the possession of the lands. Plaintiffs in error averred that they had fully performed each and every covenant on their part to be performed by the terms of said contracts; that they had executed said notes, which had been placed in escrow, and that said plaintiff in error Charles M. Peirce had been greatly damaged by amounts claimed and plaintiffs in error prayed by their cross-bill that the defendants Dunlap, Otis E. Taylor, William H. Petefish and Claude C. Petefish should be adjudged guilty of a fraud perpetrated against plaintiffs in error, and that their rights might be determined and their damages assessed, and that it should be adjudged that there was nothing due upon the said notes, principal or interest, and that they should be canceled; and plaintiffs in error prayed for general relief.

We have stated substantially the issues as made, some of which it will not be necessary to consider in deciding the case. We have had much difficulty in following the continuity of thought of plaintiffs in error in the statement of the case and in determining the necessary details of exhibits as presented by the abstract. Neither has afforded the proper assistance.

As to the “residue clause” in the original contract to be applied upon the $90,000 in notes, both sides on trial admitted that it means something, and plaintiffs in error contend that it included $24,700 for overdue interest and taxes upon Missouri land. It is quite ambiguous from all the testimony just whafcjt does mean. The master apparently estimated it at á4¡-,portion of those items at $12,700, which with interest ¿qded makes a total credit of $13,999.62. This, deducted from the total debt and interest upon the notes found to be $99,210 by the master, left a balance of $85,210.333, which the master recommended as an indebtedness owing upon the notes by plaintiffs in error and recommended a foreclosure of the mortgage.

Various objections were presented to each item and finding of the master’s report, which were overruled, made exceptions before the chancellor and overruled-,, and a decree was entered finding plaintiffs in error indebted to defendant in error in the sum of $85,210.38, in addition to a solicitor’s fee in the sum of $500 and costs of suit. The lands were ordered sold, subject to the first mortgage for $60,000, and the master was ordered to report any deficiency upon the same promptly. Plaintiffs in error have prosecuted this writ of error.

Various assignments of error are made. It seems to be established by the proofs in the case, without any denial, that at the time of the transaction in question neither Taylor nor William H. Petefish had any interest in the Pike county lands. Nichols, who had owned the lands for several years, received them from his father’s estate. The father owned them in 1903 or 1904. Nichols testified that he sold the lands to Taylor in August, 1924, at $80 an acre. Taylor testifies that he never purchased the lands from Nichols at all, although he contracted on December 13,1924, to convey the same lands to plaintiff in error and the contract states Taylor is the owner of the lands. A few days later Taylor produced a deed from Charles C. Petefish to Peirce for the lands, and the record is silent as to how Petefish ever obtained title, if he ever had title. Taylor and William H. Petefish both testified that they were “somewhat” in partnership with or agents for each other in land deals, and placed titles around where they would be convenient. It is conceded that Taylor and plaintiff in error Peirce traded lands or entered into the contract in question “unsight' and unseen.” Neither had ever seen the land of the other. There was some testimony that Ella B. Peirce with her son went to look at the Pike county lands on December 14, 1924, but if she saw the lands there is no testimony that plaintiff in error Charles M. Peirce knew anything about it. Taylor testified that they traded lands “unsight and unseen,” and that he found the lands in Missouri just as Peirce had represented them to him. At the office of plaintiff in error in Bloomington, where the contract was entered into, Henry Nierstheimer was there acting as agent for Taylor; J. F. Skaggs present and Mary Gorman, the stenographer in the office. Peirce and all except Taylor testify that he stated he would pay up at once the amount of $24,000, or something over that, on the unpaid interest, taxes and assessments against the Missouri lands; that the Pike county lands were well drained with good outlets and that the lands had recently sold for cash for $200 or better an acre. Taylor does not seriously contradict this testimony, but as to the lands having sold for $200 an acre, he states that he had reference to another tract of 850 acres in the vicinity of the 1,000-acre tract. The proof preponderates very strongly that Taylor made the representations and that Peirce relied upon his statements. The representations were false and untrue. The drainage of the land was poor and the outlets were at times blocked up completely and were very bad. The proof is conclusive that the lands never had a value of over $80 an acre and that Taylor or the Petefishes never put a penny into the tract. The first mortgage for $60,000 and the second mortgage of Nichols for $22,688.88 covered the entire purchase price for the lands, with a liberal commission to some one added. The notes and mortgage executed by plaintiffs in error, including the coupons, were all made payable to the order of Otis E. Taylor and William H. Petefish. Immediately upon Taylor borrowing the notes to take to Jacksonville and before there was any pretense of completing the contract, Taylor indorsed his interest in each and every note and coupon, without recourse, over to William H. Petefish and the notes were at once offered for sale at a large discount at the Corn Belt and First National Banks in Bloomington. Plaintiff in error Charles M. Peirce testifies that so much disturbance was caused to his credit and injury to his business that to abate it and get possession of the notes which he had never delivered, he was compelled to enter into the supplementary contract, when in fact defendant in error or his assignors had defaulted in carrying out the original agreement. No pretense is made that at this time the contract had been completed or the notes earned or delivered; nevertheless, Petefish testifies that he did offer the notes for sale and attempted to sell them. Taylor had the Missouri land conveyed by plaintiffs in error, but testifies that he received no consideration from Petefish for his interest in the notes. It was shown that there was a written contract between Taylor and Petefish covering the transactions in question, but the master refused to require them to bring it in or permit them to be interrogated in regard to it.

The whole matter stood in the condition as described until in the fall of 1925 when William H. Petefish found a place where he could borrow the funds to pay off the so-called second mortgage of Nichols or vendor’s lien. Defendant in error advanced the funds, presumably to the amount of $22,688.88, and paid off the Nichols’ debt. It is said that a decree quieting title was taken in court, but no such record is shown in this proceeding.

It is shown by a summons issued on January 2,1925, that plaintiff in error was made a defendant in a foreclosure suit and summoned before the Pike county circuit court at the suit of Harry L. Nichols. A receiver of the lands was applied for upon a petition, wherein Nichols alleged that the lands were scant security for the Nichols debt. Defendant Dunlap advanced the funds to take up the Nichols debt. Petefish testifies that the $90,000 in notes were placed in Dunlap’s hands as collateral security. Just how the notes were transferred from the depositary or escrow is not made plain. There are fragmentary statements in the briefs that defendant in error replevied the notes. No record is shown of any order of court to transfer the notes, and it is not shown that plaintiffs in error were parties to any such proceeding or ever consented to such transfer. Petefish testified while on the stand that the only interest of defendant in error in the notes was to hold them as collateral security for the payment of the Nichols debt; that he never had transferred any interest in the contracts to defendant in error and that defendant in error had no legal or equitable interest in the notes. Later he was called to the stand and testified that he did transfer his interest in "the contracts to defendant in error, and that such transfer was in writing; but the master refused to require the witness to bring in the writing or permit' Mm to "be questioned in regard thereto. From the whole record it may be said that the testimony of William H. Petefish and of Taylor is equally uncertain and undependable.

Defendant in error contends in support of the decree that he and his assignors, having completed all of the terms of the agreements and the same having been fully carried out, became entitled to the possession of the notes and could recover them in replevin without maMng plaintiffs in error parties to the replevin suit. The first serious question raised upon this contention is whether it is shown that defendant in error and his assignors have completed their contract. Defendant in error at the most is a mere assignee of Taylor and Petefish, and takes the notes and mortgage subject to all defenses that plaintiffs in error had against them. (Peacock v. Phillips, 247 Ill. 467; King v. Harpster, 306 Ill. 202; Smith v. Niemann, 216 Ill. App. 179; Utpatel v. Chicago Title & Trust Co., 218 Ill. App. 75.)

Defendant in error contracted to furnish plaintiffs in error an abstract of title brought down to date, showing merchantable title to the lands. The supplementary agreement is based upon the provision that defendant-in error shall have complied with the agreement of December 13, 1924, in toto, and provides that abstracts shall be furnished showing merchantable title and time afforded Charles M. Peirce to examine the same for 30 days after the abstracts are furnished him and in his possession for said examination, in which time said Peirce “agrees by written order to said bank to release said notes, providing parties of the first part have complied with their agreement in toto of December 13, 1924.” Plaintiffs in error deny that any such abstract was sent them. Under the terms of the contract, it is a condition precedent to defendant in error’s case to show that such an abstract was sent before defendant in error would even be entitled to the possession of the notes. The master has found, and the chancellor has approved the finding, that an abstract was furnished plaintiffs in error and that no objection was made within 30 days to said abstract; therefore, that part of the agreement has been complied with. We cannot agree with the master and chancellor in this conclusion. There is no testimony in the record upon which it can be based. It is true that Taylor testifies: “The abstract was furnished Peirce after the title was quieted; sent by mail to his office. Peirce claimed after the abstract had been presented to him showing everything he could kick on, before Robinson, Petefish and me, that the contract of December 13 had not been carried out. ... I sided in with Peirce and I told him that the contract did say that we were to credit these notes with the residue, and asked him if he could tell how much the notes were to be credited with. He said he didn’t have the figures.”

At another time Taylor testified: “I don’t know when Peirce was furnished a copy of the abstract. I don’t know whether it was furnished to Peirce before the supplemental agreement or not. I think before, in January, either a few days before or a few days after. I was notified by Péirce that the abstract did not show a merchantable title. I was furnished with a copy of his opinion.”

Taylor and Peirce talked again about the abstract in Grote’s office. Taylor testifies that he did not state to Peirce that he had transferred all of his interest to Petefish, because it was none of Peirce’s business. Petefish testified that he had never offered to -settle any of the amounts growing out of the contract with Peirce and that he never would. There was correspondence between Petefish and Peirce in August, 1925, in which Peirce writes he has not had time to check up on abstract, and Petefish writes that he is ready to make credit on the notes in accordance with the contract as soon as the notes were in his possession so he could and Peirce gives him a basis for computation and they could agree on an account of the credit. Afterwards, on September 1, 1925, Dunlap writes that nothing remains to be closed in Peirce’s office, although the contract provided that the deal should be closed at his office in Bloomington.

There is no question but that some kind of an instrument called an “abstract” was furnished to plaintiff in error, but to find that it showed a merchantable title to lands is a mere conclusion. It showed, so far as this record is concerned, nothing as to the title to said lands. The further contention, that because plaintiff in error did not accept or reject the abstract within 30 days he waived the provision of the contract, is not sound when it is conceded by all parties to the contract that plaintiff in error was entitled to a settlement and credit upon the notes before they were to be delivered, and that settlement by the specific terms of the contract was to be held in Bloomington.

The lower court has held and decreed that plaintiff in error was entitled to a credit of $12,700 and interest. That credit plaintiff in error was entitled to, if at all, before the delivery of the notes.

Defendant in error misapprehends the nature and meaning of the supplementary contract. It does not provide that upon the completion of the title and the furnishing of an abstract he shall become possessed or entitled to the possession of the notes in the escrow’s hands. It only provides that defendant in errór shall become entitled to a written order from plaintiff in error upon the escrow to turn over the notes. ' Plaintiff in error is entitled to his day in court to protect his own possession, which is merely committed for him to the escrow. In this case as in Chicago & G. W. R. Land Co. v. Peck, 112 Ill. 408, 447: “The depositary of an escrow is a special and not a general agent, and the person dealing with him is bound to know the extent of his powers. (Smith v. South Royalton Bank, 32 Vt. 350.) It is the settled doctrine that the delivery of an escrow by the depositary to the grantee named therein, without a compliance with the conditions, is not a delivery with the assent of the grantor, and conveys no title, and that the authority of the depositary of an escrow is limited strictly to the conditions of the deposit, a compliance with which alone justifies the delivery.” Neither will a recovery by replevin give force to an instrument held in escrow.

In Jacobitz v. Thomsen, 238 Ill. App. 37, the facts were:

“The only witnesses who testified upon behalf of the plaintiff in chief were Thullen and the cashier of the bank which held the note in escrow. Thullen testified that the note was placed in escrow to be delivered upon the completion of the buildings; that the buildings were thereafter completed; that Thomsen found fault with one of them in small matters, which the witness remedied and told Thomsen he was going to the bank to get his note, to which Thomsen did not reply, but the bank refused to deliver it, whereupon he secured possession of it in a replevin suit, which is still pending. The cashier of the bank, called by the plaintiff, testified that the note was left with the bank ‘in escrow, to be delivered when the buildings were completed and accepted by the Dolton estate, on instructions from Thomsen,’ and that Thomsen never directed him or the bank to turn the note over to Thullen, but that the bank delivered it to the sheriff on the replevin writ.”

The court held: “If the escrow agreement was to the effect stated by plaintiff’s own witness, the cashier of the bank, it is clear that the note was never delivered. If the escrow agreement was as stated by Thullen, still, as it appears that there was a dispute as to whether the buildings were ever completed, there could be no delivery until the dispute was settled, in the replevin suit or elsewhere. In either case, the note never became an obligation binding, as such, upon the defendants.”

From the cases cited and from Stanley v. Valentine, 79 Ill. 544, 547; Fitch v. Miller, 200 Ill. 170, 180; Grindle v. Grindle, 240 Ill. 143, 149; Forcum v. Brown, 251 Ill. 314; Osby v. Reynolds, 260 Ill. 576, and Main v. Pratt, 276 Ill. 218, 224, it is apparent that the notes in question were never delivered by plaintiffs in error and never became a binding obligation upon them. No contract arises on a note until the delivery. (8 Corpus Juris 203; Gordon v. Adams, 127 Ill. 223.)

The contract sought to be enforced in this case by defendant in error is tinctured with fraud and misrepresentations, and is unconscionable and extortionate. It is a general rule of equity not to exercise its extraordinary jurisdiction when it will operate inequitably or oppressively. (5 Pom. Eq. Jur., 3d Ed., sec. 500; Aldrich v. R. J. Ederer Co., 220 Ill. App. 333, 339; Fargo v. Goodspeed, 87 Ill. 290; American University v. Wood, 294 Ill. 186, 195.)

It would serve no useful purpose to reverse the decree in this cause to the end that these or some other parties might again submit this cause upon the completion of the contracts to this or some other court of equity. This applies to the notes executed by plaintiffs in error and the mortgage in question securing the notes to the amount of $90,000. The uncontradicted testimony shows that defendant in error, through his assigns Or through those for whom he is acting, purchased the lands for $80,000, for which, by means of the, misrepresentations set out, they are seeking to mulct plaintiffs in error in the full sum of $150,000 This amount is in addition to any value of the property in Missouri conveyed by plaintiffs in error to Taylor. Defendant in error, however, has certain equities in the lands not tinctured with fraud. Under the original contract in this cause plaintiffs in error agreed to accept the lands for the principal sum of $20,000, subject to a second mortgage. It is shown without dispute that defendant in error furnished the funds with which to pay off and satisfy this second mortgage, with the full knowledge and approbation of plaintiffs in error. Defendant in error should be subrogated to the rights of the second mortgagee, Nichols, to the amount of said sum of $20,000 as of the first day of January, 1925, with interest on said sum from said first day of January, 1925, to the payment of the same, in so far as defendant in error may hereafter desire to enforce said subrogation.

A considerable amount of testimony was offered by plaintiffs in error, tending to establish substantial damages to plaintiff in error Charles M. Peirce, by reason of the acts of the defendant in error and his assignor. We have in no manner passed upon said testimony, inasmuch as in the opinion of this court plaintiffs in error have the greater equity in the cancellation of said notes and mortgage. In all other respects the parties should be left as the court found them.

The decree of the circuit court of Pike county is reversed and the cause remanded with directions to enter a decree dismissing said original bill for want of equity, without prejudice to defendant in error to seek subrogation for the amount of moneys advanced to pay off said second mortgage to the amount of $20,000, with interest thereon from January 1, 1925.

Reversed and remanded with directions.


source: Caselaw Access Project

author: Mr. Justice Niehaus

license: Public Domain

text:
    Lamina Cory, Appellee, v. Woodmen Accident Company, Appellant.
    Gen. No. 8,135.

      Opinion filed January 25, 1928.
    Rehearing denied April 12, 1928.
    William and Barry Mumpord, for appellant.
    Capps & Weaver, for appellee.
   Mr. Justice Niehaus

delivered the opinion of the court.

This suit was instituted in the circuit court of Pike county against the appellant, Woodmen Accident Company, by the appellee, Lamina Cory, who is the beneficiary named in an accident indemnity policy issued by the appellant company to Martin C. Cory, the appellee’s husband. The appellee claims the right to recover an indemnity of $1,000, under the terms of the policy. The declaration alleges that Martin C. Cory died by external violent and accidental means; and that his death resulted directly and exclusively from a bodily injury, namely, a gunshot wound which was affected by accidental means — the discharge of a certain firearm held by one Victor Seybold on the 15th day of June, 1924. There was a jury trial and a verdict finding the issues in favor of the appellee, and fixing the amount of her damages at' $1,000. At the instance of the appellant, the jury made a special'finding that the injury to the insured, Martin C. Cory, was not sustained while he was in the act of fighting. The appellant made a motion to set aside the verdict and the special finding'; and for a new trial, which was denied by the court. Judgment was thereupon rendered against the appellant for the amount of the verdict, and this appeal is prosecuted from the judgment.

A number of grounds are urged on appeal for reversal of the judgment. It is insisted that Cory’s death did not result from accidental means; that the deceased was engaged in fighting at the time he was shot, which resulted in his death; also, that the act of shooting, which inflicted a mortal wound on Cory, was the intentional act of Victor Seybold, the person who did the shooting; and that under section 30 of appellant’s by-laws no indemnity can therefore be recovered under the policy.

There is very little controversy about the facts: The insured Martin C. Cory procured the indemnity policy in question for the benefit, of his wife on June 3, 1912. At the time the policy was issued and at the time of his injury and death, he resided with his family on a farm in Pike county, near Tempest. Mina Huston, a niece, resided with the Cory family; she had been keeping company with a young man by the name of Victor Seybold, who was about 19 years of age at the time of the occurrence on June 15,1924, in which Cory was injured, which injury finally resulted in his death. Late in the evening of the day mentioned, Seybold had an altercation with Cory, in which he shot Cory and thereby caused the mortal wound, from which Cory died on July 23 following. Concerning the incidents connected with the shooting of Cory; the appellee, Lamina Cory, testified as follows: * On the evening of June 15, 1924, we went to a children’s day exercise at Morrellville,'Illinois, which I judge is about three miles from our home and we returned home I judge between ten and eleven o’clock at night. In our party so returning home, my husband and my three children were with me. The name of the oldest child is Edwin. He was then 11 years old. . . . When we got home we drove our car into the car shed, and I got out and went to the house. My husband came to the house a few minutes afterwards. Mina Huston and a fellow by the name of Johnson had come to our home before we got there, and were sitting in a car in front of the gate. Mina Huston was my niece and she made her home with me. They were sitting in a car in front of the gate when we got home; Mina Huston and the Johnson boy. As we went in at. our home we drove in front of their car. We stopped just long enough for me to say to my niece, you had better come into the house. No other persons were there except Miss Huston and Mr. Johnson. My children went into the house with me. Later my husband came in, perhaps two or three minutes later. This house is on a farm and is situated south of and facing an east and west road. When my husband came in he went into the northeast bedroom. I was in the room used by us as a living room and was lying on a couch. ‘ This room I was in is south of the room into which my husband went. He came through the room where I was. The house has a north door and two east doors. A walk leads from the gate south to the house. It comes to the front door and goes around to the east door. .The front gate is a little bit east of north from the north door. ... I saw my husband after he went into the living room. It was just a short while after; a few minutes before I saw my husband again, I heard Mina Huston come to the north front door and heard her say, Uncle Mart, some one out here wants to speak to you. I knew the voice as that of Mina Huston. I was sitting on the couch in the living room. Before that I had heard a car drive up in front; did not notice■ whether it stopped. My husband replied to Miss Huston, all right, I’ll be there. He then came back through the room I was in and went out through the east door. The next thing I heard was a gun shot. I jumped up and started out to where it was. I went out the east door and went north. The next thing I heard was another gun shot. The next thing I heard was from my husband who hollered to me, ' The Gr-d-little s-b-has got me; go call the sheriff.’ Vic (Seybold) said 'Don’t call the sheriff; if you do, I’ll shoot the whole Gr- d — — family.’ Seybold lived about a mile west of the house. I was well acquainted with him. I know his voice. I turned and ran into the house and called the sheriff. My husband came in later; I judge in about two or three minutes. When he came in he was holding his hand to his side like this (indicating). I was at the telephone. He walked in at the east door and on to the couch and lay down. I went to him after I called the sheriff. J found that he had been shot in the-side (indicating). I removed his clothing so I could see the wound. I did see the wound there. When my husband went out to the road he was in his shirt sleeves. He had changed to a blue shirt after he came back from the children’s exercises. I called Dr. Andrew and Dr. Chaisson. My husband lived for five weeks and three days after he was shot.”

The appellant, in denial of appellee’s right to recover under the policy, and as a matter of defense, put in evidence section 30 of the by-laws of the appellant company bearing upon the questions referred to. Section 30 of the by-laws provides: . . No indemnity shall be provided for either disappearance, or injuries, disability or death sustained under any of the following conditions: . . .; while the insured is engaged in any of the following risks or acts: dueling or° fighting; . . . violating the law of any State or Nation; . . . No indemnity shall be provided to cover injuries, disability or death, due wholly or in part, directly or indirectly, to any of the following causes: . . .; intentional acts of the insured or any other person.

In considering the merits of appellant’s defense under the by-laws which limit liability under the policy sued on, consideration should be given to the fact that these are laws prepared by the appellant, and the language employed for the purpose of limiting liability was prepared by the appellant; and therefore in construing the by-laws a construction thereof should be given which is most favorable to the insured; that is to say, they should be construed so as to enable the beneficiary to get the benefit of the indemnity provided for her in the policy, if such construction is reasonable and just; Niagara Fire Ins. Co. v. D. Heenan & Co., 181 Ill. 575, affirming 81 Ill. App. 678; National Masonic Acc. Ass’n v. Seed, 95 Ill. App. 43.

Concerning appellant’s contention that Martin C. Cory was shot during his altercation with Victor Seybold, when he was in the act of fighting, the testimony of Seybold given at the trial must be considered. Mina Huston, on the evening that the shooting took place, had attended the children’s day exercises at Morrellville, with the Cory family, and had returned from the entertainment mentioned to the Cory home, about eleven o ’clock p. m., with a young man by the name of Johnson, who had taken her there in his car. Mina Huston and Johnson were sitting in the Johnson car which was standing in front of the Cory home when the Cory family returned from the entertainment. After-wards, Seybold drove up in his car in company with another young man by the name of Leslie Potter. He testified that he got there between ten and eleven o’clock that evening; that he found another car in front of the Gory home and that Herbert Johnson and Mina Huston were in the car; and that he stopped; that he saw Martin Cory that night; that he saw him first at the children’s exercises; that he had known Martin Cory before that; that he had never had a controversy with him before; that when he first saw Martin Cory that night at his home he was coming down the walk to the road where he was standing behind his car; that he came out to the gate and stepped over a few feet west behind the Johnson car; when he stopped, that he and Cory were about six or eight feet apart; that Cory spoke first saying, “here we are, what will you have!” Concerning what occurred after that, Seybold’s testimony is as follows: “His tone attracted my particular attention. I never before had a controversy with him. I had been calling there upon the young lady who after-wards became my wife. She was working there. Next after he spoke I asked him what he told Mina I had said about her. He said, you have said a h-of a lot. Next, I said, I hadn’t. I denied making any statement. He then called me a d-liar. During this altercation we remained in the same positions we were in when he stopped, neither of us advanced towards the other at any time. When, he called me a liar I guess I called him another one. He then started to come towards me. I did not start towards him but he started towards me. I told him to stand back or I would shoot him, and he said, no you won’t, and came on and grabbed me around the neck, and I pulled back about eight or ten feet, and I shot at the side of him; he doubled up with his right arm around my neck and began to reach for his hip pocket and I shot him. We were on the south side of the road and he got his right arm around my neck. He did nothing with his right hand till I fired the first shot. I backed off six or eight feet from where I was standing. His arm was around my neck. After I fired the first shot he tightened up on my neck and grabbed for his hip pocket with his left hand. I kept backing across the road. When I finally shot him we were pretty well to the north side of the road, and I fired the second shot.” Seybold was thereupon interrogated as follows:

“Q. Did you intend to hit him with that revolver ? A. I did.
“Q. Did you intend to kill him? A. I did not.
“Q. What did you intend to do ? A. To make him let loose. °
“Q. Did it have that effect? A. It did.”

Seybold also testified on cross-examination as follows : “He grabbed me as I pulled the gun out of my pocket. He pulled me up to him. I pulled my head down to keep him from getting too close. Then he was putting his left hand to his left pocket. He was not trying to get my throat with his left hand. ... I shot by the side of him the first time. I didn’t intend even to hit him. The next time I did intend to hit him, but did not intend to kill him. I shot to make him let loose and he' did let loose.” The wound inflicted by Seybold was a mortal wound which caused an abscess to form on the liver from which he died.

It will be noted, from the testimony of Seybold, that there was no attempt on the part of Cory, at any time during the altercation, to strike Seybold or injure him in anyway; and it is but a fair inference, from the testimony of Seybold himself, that Cory’s actions and movements apparently had in view either to disarm Seybold or get him in a position where he could not use his gun. We conclude, therefore, that the jury were warranted in drawing'the inference embodied in the special finding, that Cory was not “fighting” Seybold at.the time he was shot. It is also proper and reasonable inference to be drawn from the evidence, and directly from the testimony of Seybold himself, that Seybold had no intention of inflicting a mortal wound on Cory, and that Cory did not have any idea that he would do so; and that the death of Cory was therefore a matter which was unforeseen and unexpected by both Seybold and Cory, and not intended by Seybold. Cory’s death being unforeseen and unexpected from the act of Seybold and not intended and not the necessary result of the shooting, can therefore reasonably be regarded as accidental, and should be so regarded as a matter of law. Cooley in his Briefs on Insurance gives a very clear definition of what should be considered accidental means: An effect which is not the natural or probable consequence of the means which produced it, an effect which does not ordinarily follow and cannot be reasonably anticipated from the use of such means, an effect which the actor' did not intend to produce and which he cannot be charged with the design of producing, is produced by “accidental means.” 4 Cooley’s Briefs on Insurance 3156. In Higgins v. Midland Casualty Co., 281 Ill. 431, in considering the question here involvéd, the Supreme Court said: “If, in the act which precedes the injury, though an intentional one, something unforeseen, unexpected and unusual occurs which produces the injury, it is accidentally caused.” And in Nalty v. Federal Casualty Co., 245 Ill. App. 180, the Appellate Court gives the following definition of an accidental injury: ‘ One which could not have been reasonably anticipated and which he did not intend to produce; that is, it was not the natural or probable consequent of his act; and was not the result of design but was produced unexpectedly and by chance.” There are a number of authorities to the same effect: Robison v. United States Health & Accident Ins. Co., 192 Ill. App. 475; Hutton v. States Accident Ins. Co., 267 Ill. 267; United States Mut. Accident Ass’n v. Barry, 131 U. S. 100. Another definition is, an effect which does not ordinarily follow and cannot be reasonably anticipated from the use of those means; an effect which the actor did not intend to produce ; and cannot be charged with the design of producing, is produced by accidental means. Western Commercial Travelers’ Ass’n v. Smith, 85 Fed. 401, 40 L. R. A. 653; Lickleider v. Iowa State Traveling Men’s Ass’n, 184 Iowa 423, 3 A. L. R. 1295. We therefore conclude that the inference may be justly and properly drawn from the facts proven, that the death of Martin C. Cory resulted directly and exclusively from external violent and accidental means, and that the jury were warranted in so finding by the verdict.

It is also contended by the appellant, that under the by-laws of the company, in order to entitle the appellee to recover the indemnity claim, that it was necessary that written notice of the injury which Cory suffered should have been given by Cory and received by the appellant at its home office at Lincoln, Nebraska, within 20 days after such injury; and that the proof does not show that such notice was given and received. It may be said, with reference to this contention, that the proof shows that W. W. Hooper, who was the agent of the appellant at that time, to collect premiums on its policies, at the instance and request of E. E. Cory, the uncle of the insured, and acting in his behalf, sent a notice to the appellant, through the mails by letter, informing appellant company of the injury which Cory had suffered, and calling the company’s attention to the policy which he held by number; and that this notice was sent within 14 days after the injury. Hooper testified that he wrote the letter on the typewriter and mailed it, addressed to the Woodmen Accident Company, Lincoln, Nebraska, its home office; that he mailed it the evening of the day that he wrote it. Appellant insists that this proof is insufficient; and that it does not show that the appellant company received the letter at its home office at Lincoln, Nebraska, within 20 days as required by the by-laws. It was not incumbent upon the appellee to show by direct evidence that the appellant received the letter containing the notice at its home office at Lincoln, Nebraska, and the court will take judicial notice of the fact that by the ordinary course of the post, a letter mailed at Baylis, Illinois, 14 days after the injury, would reach Lincoln, Nebraska, within 20 days of the day of the injury. National Masonic Accident Ass’n v. Seed, 95 Ill. App. 43. And appellant did not offer any evidence to rebut this presumption of law. But it should also be pointed out in reference to this contention, that the by-law referred to, which requires notice for accidental injuries to the insured, clearly has reference to such injuries which are the basis of a claim for indemnity by the insured, and does not apply to claims by a beneficiary in the policy for indemnity on account of the accidental death of the insured, and therefore the notice referred to was not necessary as a condition precedent to a right to recover an indemnity claim such as the one involved in this controversy. It is further contended by the appellant company that there were no proofs of death forwarded to the company within 90 days as required by the by-laws, and that therefore the, appellee has no right to recover the indemnity. The by-law referred to provides that: “No payment shall be made on any claim until complete proof has been furnished the company at its home office, Lincoln,.Nebraska, to énable it to know and determine the character and extent of any injury for which claim is made, nor unless such proof is filed with the secretary within ninety (90) days of the death. . . . Claims shall be due and payable within 60 days from the date on which satisfactory proof is filed in the home office, Lincoln, Nebraska.” It is evident from the tenor of the by-law just referred to, that its purpose is to procure for the company complete and satisfactory proof of death, so as “to enable the company to know and determine the character and extent of any injury for which claim is made.” The by-law does not specify in what form or character the proof of death shall be made, which shall be considered complete or satisfactory to the company; nor does it specify how. the proof shall be made, nor that the same shall be verified. There was evidence introduced at the trial, without objection, which tended to show a substantial compliance by the appellee with the requirements of the by-laws concerning proof of death, which was satisfactory to the appellant as to completeness. J. L. Stauffer testified that after Cory’s death, at the request of the appellee, he wrote and mailed a letter to appellant of the following import: “On June 1st, 1912, you issued an accident policy number 231588 to Martin C. Cory, Baylis, Ill. Mr. Cory was killed recently and we would like to know, at the request of his wife if this policy is still in force, and if Mr. Cory has kept his assessments paid.” And on August 18 following sent another communication by mail to the appellant company at its home office in Lincoln, Nebraska, which is as follows:

“Farmers Bank of Baylis Baylis, Ill.,
August 18, 1924.
Woodmen Accident Association,
Lincoln, Neb.
“Gentlemen:
“In reply to your late letter asking particulars about the death of Martin C. Cory who held a policy with you. Mr. Cory was called out of his home on the evening of June 15,1924, and shot. He died on July 26, 1924, being in a serious condition from time of being wounded until his death.
“Will you kindly send necessary blanks to file claim.
Tours respt.,'
J. L. Stauffer.”

To the last letter, the appellant company made the following reply:

“Woodmen Accident Company Lincoln, Nebraska.
Mr. J. L. Stauffer, August 20, 1924.
Baylis, Ill. Be: Martin Cory, Baylis, Ill.
“Dear Sir:
“While your letter of August 18, does not give very complete particulars we have since the receipt of your previous letter made some investigation of the case. From the information at hand it appears that Mr. Cory was purposely shot by one Victor Seybold and the circumstances seem to be such that claim for the principal sum of his accident insurance policy cannot properly be filed.
“The by-laws of the company which are made a part of the insurance contract provide that no indemnity shall be paid for disability or death due to intentional acts of the insured or any other person. We enclose a copy of the by-laws and refer you particularly to section 30.
Tours truly,
Woodmen Accident Company, M. E. Lindberg,
mel:e • Auditor of Claims.”

Thereafter on Oct. 8, before the expiration of the 90-day limit for filing proofs of death, Capps & Weaver, as attorneys for the appellee, sent the following communication to the appellant company at its home office in Lincoln, Nebraska:

“October 8, 1924.
Woodmen Accident Company, Lincoln, Nebraska.
“Dears Sirs: Be: Martin Cory, Baylis, Til.
“We are in receipt of your letter of the 8th inst., denying liability on your policy issued to the above named. We note you request we furnish you the spefifi» cases to which our former letter seems to have reference. The last word of the Courts of this State in cases similar to this, we believe to be the decision of the Appellate Court of the 4th District, handed down at the October Term, 1923, in the case of Jennie Nalty, Appellee, vs. Federal Casualty Company, Appellant. This decision has not yet been published in our bound volumes. For a small fee a copy of this opinion can be obtained from Bobt. B. Boe, Clerk of Appellate Court, Mt. Vernon, Illinois.
“We do not know whether Mrs. Cory has made formal proof of death in this case or not, and in view of your denial of liability we do not believe that such proof is necessary. However, to avoid any question upon that point, if she has not made such proof, will you kindly forward us at once the necessary blanks for making the same, so that we may get them in within the time required.
Tours very truly,
Capps & Weaver.”

The appellant company made no reply for nearly a month to the letter of appellee’s attorneys, requesting blanks of the company to make complete proof of death, not until November 5, after the 90-days ’ limit had expired, but no blanks were sent. In this letter, apparently in explanation of the company’s failure to forward blanks, the appellant says: “In the last part of your last letter you referred to the matter of final proofs and we will advise that none have been submitted. We really cannot see that there is anything to be gained by going to the trouble and expense of completing proof for the facts in the case seem to be clear as to the circumstances and manner in which death occurred.” It will be noted that the position taken by the company in the letter last referred to is in accord with the position assumed in its letters of reply to Stauffer’s letter of August 18, in which Stauffer had also requested the company to send the necessary blanks for filing appellee’s claim; and the request was not complied with presumably for the same reasons given in the company’s letter of November 5. And it is apparent, from the correspondence referred to, that the appellant company did not at any time deem it necessary to have any further or more complete proof of death than those which it had had on hand; and that it considered the facts concerning the death of Cory contained in the communications sent in at the instance of the appellee sufficiently complete and satisfactory “to enable the company to know and determine the character and extent of any injury for which claim is made,” and therefore did not send any blanks to the appellee for more complete proofs of Cory’s death within the 90-days’ limit. Having assumed that position, the appellant could not, after the expiration of the time limit, change its position to the detriment of appellee’s right of recovery, but it is legally estopped to deny that complete or satisfactory, proofs of death to comply with the by-laws were not furnished by the appellee. It'is pointed out in 1 Herman on the Law of Estoppel, sec. 736: “The unsolemn admissions extra judicium, which have been acted upon or were to influence the conduct of others, or to derive some advantage to the party which cannot be afterwards claimed without breach of good faith are known as estoppels in pais:” Also that: “The rule of law is clear, that where one by his words or conduct wilfully causes another to believe the existence of a certain state of things and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at the time.” 1 Herman on the Law of Estoppel, sec. 750. Pickard v. Sears, 6 Ad. & El. 469; Niantic Bank v. Dennis, 37 Ill. 381, cited in 132 Ill. 645. “Representations are to be regarded as wilful when the person making them means them to be acted on, or if without regard to the intention, he so conducted himself that a reasonable man would take the representation to be true, and believe it was meant he should act on it.” 1 Herman on the Law of Estoppel, sec. 754. “A fraudulent intention is not essential to the doctrine of estoppel. It is enough if a fraudulent effect would follow allowing a party to set up a claim inconsistent with his former declarations or conduct.” Milligan v. Miller, 253 Ill. 511. The proof made of what was done by the parties concerning proofs of death was competent under the averments of the declaration, and as tending to show performance of the conditions of the policy. It is not necessary however to specially plead a matter which constitutes an estoppel in pais, but such estoppel may arise from the evidence and can be relied on as conclusive without being specially pleaded. 2 Herman on Law of Estoppel, p. 1441, sec. 1296; Bigelow on Estoppel (1st Ed.) 590; 2 Smith’s Leading Cases 794, 954; 8 Ency. of Pl. & Pr. 6; Welland Canal Co. v. Hathaway, 8 Wend. (N. Y.) 483; Oliver, Duchess of Kingston Case, (7th Am. Ed.) 658; May on Insurance, sec. 505. Moreover, the appellant in its letter of August 20, 1924, herein-before set forth, denied the legal right of appellee to file a claim for the indemnity in question, and denied its liability under the policy. It is well settled that a denial of liability dispenses with the necessity of filings proofs of death. Metropolitan Accident Ass’n v. Froiland, 161 Ill. 30; Covenant Mut. Benefit Ass’n v. Spies, 114 Ill. 463, affirming 59 Ill. App. 522; Metropolitan Life Ins. Co. v. Zeigler, 59 Ill. App. 447.

Complaint is also made that there was error in the giving of some of the instructions for the appellee, and in modifying some of the instructions given for the appellant, but the instructions are not set out in the brief and argument, but merely referred to by designated numbers. The questions involved are therefore not properly before us for consideration. In General Platers Supply Co. v. L’Hommedieu & Sons Co., 228 Ill. App. 201, the court referring to this matter pointed out: “Counsel for defendant has questioned some of the instructions given and refused, but in argument presents them only by number. This is not the proper way to present instructions for consideration by this court. Instructions of which complaint is made should be set out in full, followed by definite and clear reasons supporting the alleged errors incident thereto.” And in Sterling Midland Coal Co. v. Ready & Callaghan Coal Co., 236 Ill. App. 403, the court said: “Counsel for the defendant further contend certain instructions given on behalf of the plaintiff are erroneous. These instructions are not set out in the brief of counsel for the defendant, but are merely designated as instructions Nos. 2, 3 and 5. It has been held that this is not the proper way to present instructions for consideration by the court.” These matters of complaint are therefore not before us for review.

For the reasons stated, the judgment is affirmed.

Judgment affirmed.


text:
    Sterling-Midland Coal Company, Appellant, v. Chicago-Williamsville Coal Company et al., Appellees.
    Gen. No. 8,148.

      Opinion filed February 8, 1928.
    Rehearing denied April 12, 1928.
    Charles S. Andrus, for appellant.
    A. M. Fitzgerald and H. C. Moore, for appellees.
   Mr. Justice Niehaus

delivered the opinion of the court.

The controversy in this case concerns the allegations of an amended bill in equity, filed in the circuit court of Sangamon county by the Sterling-Midland Coal Company as judgment creditor against the Chicago-Williamsville Coal Company, and against William Ryan, John W. Kapp, Jr., John Sankey, George W. Hatch, Harry D'everaux, Eugene Colgin and Edgar H. Buckley, alleged to be directors and stockholders of the company. Deveraux and Colgin were after-wards dismissed from the case as defendants in the bill. The bill alleges that on, to wit, May 29, 1920, the Chicago-Williamsville Coal Company owned a coal mine which was situated in Sangamon county; and that on the date mentioned the company sold it to Leslie J. Pulliam; and upon information and belief it is stated that the amount received from this sale was in excess of $100,000; and that the company by this sale divested itself of its entire property and thereby became insolvent. The bill further alleges that, at the time of the sale referred to, the Chicago-Williamsville Coal Company was indebted to the complainant company in the sum of $4,617.06, and a judgment was rendered on April 14, 1924, in favor of the complainant company in the circuit court of Cook county against the Chicago-Williamsville Coal Company; and that no part of this amount has been paid; and that the entire amount was due and owing. The bill further alleges that the defendants William Ryan, John W. Kapp, Jr., John Sankey, George W. Hatch, , Harry Deveraux, Eugene Colgin and Edgar H. Buckley were directors and stockholders in the Chieago-Williamsville Coal Company at the time of the sale of the property mentioned, and that it was their duty to use the money obtained from said sale to pay the debts of the Chieago-Williamsville Coal Company, but that instead of doing so, the entire proceeds of the sale were distributed among the above-named defendants. The prayer of the bill is that the defendants, the Chicago-Williams-ville Coal Company, William Ryan, John W. Kapp, Jr., John Sankey, George W. Hatch, Harry Deveraux, Eugene Colgin and Edgar H. Buckley, be required to account for the money received from the sale of the property of the Chicago Williamsvillé Coal Company, and may be compelled to pay the complainant company the amount due it; and that the complainant company may have such other further relief as equity may require. The defendants in the bill filed an answer admitting that the Chieago-Williamsville Coal Company is an Illinois corporation and had owned a mine situated in Sangamon county, and sold the mine to Leslie J. Pulliam. They neither admitted nor denied that they were directors and stockholders in the Chieago-Williamsville Coal Company on May 29, 1920, but asked that strict proof be made thereof; they neither admitted nor denied that the amount of money received from the sale was in excess of $100,000, but asked for strict proof of the fact; they denied that by the sale mentioned the Chieago-Williamsville Coal Company divested itself of its entire property; and denied that said company became or was insolvent; and they denied that at the time of the sale said company was indebted to the complainant company in the sum of $4,617.06, and that said amount was due and owing to the complainant company; and denied that the entire proceeds of the sale of said coal mine was distributed among the defendants. They admit that on April 14, 1924, judgment was rendered in favor of the complainant company against the Chicago-Williamsville Coal Company in the circuit court of Cook county for the sum of $4,617.06, and admit that no part of said amount has been paid the complainant company by the ChicagoWilliamsville Coal Company, but assert that said judgment was obtained by the complainant company through fraud, concealment and improper doings on the part of the complainant company. In the answer of the defendants there are also a number of general averments in reference to business transactions between the complainant company and the ChicagoWilliamsville Coal Company prior to the recovery of the judgment referred to, in reference to the sale of coal shipped by the Chicago-Williamsville Coal Company to be sold by the complainant company for the Chicago-Williamsville Coal Company, and that the complainant company practiced a fraud on the Chicago-Williamsville Coal Company in not making a proper or correct accounting to the Chicago-Williams-ville Coal Company, not reporting the correct amount of prices at which it sold the coal to the various purchasers thereof. But there are no allegations of fact to sustain the averment that the judgment was obtained by the complainant company through fraud, concealment and improper doings on the part of the complainant company. The defendants also filed a cross-bill containing averments of the character and effect referred to concerning certain business transactions involved in the sale of the coal shipped by the Chicago-Williamsville Coal Company to the complainant company, and that the complainant company committed a fraud upon the Chicago-Williamsville Coal Company by not making a proper and correct accounting in reference to the sales of such coal, prior to the recovery of the judgment referred to, and the prayer of the cross-bill is that the complainant company may be compelled to make a true and correct account of the transaction referred to. A demurrer was sustained to the cross-bill, and no further proceedings were had in reference thereto. The issues involved on the original bill were referred to the master, who heard the testimony of the witnesses and reported the same to the court. Upon a hearing of the case, the court found the equities in the cause in favor of the defendants, and dismissed the bill for want of equity. An appeal is prosecuted from the decree dismissing the bill.

On the hearing before the master it was stipulated that the records of Sangamon county showed a “deed of conveyance from the Chicago-Williamsville Coal Company, a corporation, to Leslie J. Pulliam; and that this deed bears date the 29th day of May, 1920; and was executed by the Chicago-Williamsville Coal Company, by Edgar H. Buckley, President; and attested by John W. Kapp, Jr., Secretary;.and that it bears United States Revenue Stamps for the amount of $200,000.00 consideration; and that it consisted of mine property located in the county of Sangamon.”

John W. Kapp, Jr., was a witness on the hearing before the master, and testified concerning the controverted matters in issue as follows: “I live at Springfield and am one of the defendants. On May 29, 1920, to the best of my recollection, the directors of the Chicago-Williamsville Coal Company were Edgar Buckley, George W; Hatch and John E. Sankey, . . . and William Ryan. I was Secretary of the corporation. . . . We hhd an office in the Booth 'building. . . . Ed Buckley was one of the directors, John Sankey was one of them, I was one, and Mr. Ryan was one, and George W. Hatch. The Chicago-Williamsville Coal Company sold the mine to Leslie J. Pulliam. I do not know how much they received for it. I was one of the directors and one of the stockholders. I do not know how much money they received. I know how much I received. I received about $22,000.00. Mr. Ryan was treasurer at that time. I don’t think the money was paid to him. The Chicago-Williamsville Coal Company did not own any other property except this mine on May 29, 1920, that I know of. . . . The ChicagoWilliamsville Coal Comapny after that never transacted any business that I know of.” The witness also testified, concerning the books of the corporation after the sale referred to: “We put the books in the Chatterton building for storage. I had resigned. They were not mine' any more. Mr. Sankey had resigned. The books were taken to the Chatterton theater in June, 1920.” On cross-examination the witness testified: “I do not know when I sold my stock in the Chicago-Williamsville Coal Company. I could not tell you whether it was before or after the deed to Mr. Pulliam. When we sold out I believe I had 333 shares. I am not sure about that but that is to the best of my knowledge. I do not remember all the details for consideration of the sale of this stock. I got about $22,000.00. After the sale of the stock I resigned as' director and secretary.”

William M. Ryan, one of the defendants, testified as follows: “I live at Springfield and am one of the defendants and was treasurer of the Chicago-Williams-ville Coal Company. When the sale of the mine was made to Leslie J. Pulliam on May 29, 1920, $66,000.00 was received as a consideration. The Chicago-Williamsville Coal Company is not engaged in business now and has not been engaged in business since the sale of this property. After this sale this company did not own any other property. The proceeds of the sale went to Sankey, Kapp and I. We got $22,000.00 apiece.” The witness also testified on cross-examination : ‘‘ The consideration for the property, as I understand it, was $200,000.00. There were seven, I think, stockholders in this corporation, or six, and the property was sold to Leslie J. Pulliam as an individual. I do not know what he done with Buckley, Hatch, Deveraux, or the rest of the stockholders, except he took care of Sankey, Kapp and I, to get us out. He assumed other indebtedness for the property, firms of Chicago and others. I do not remember whether they were paid or what was done about it. My knowledge and testimony is solely to the money that Mr. Kapp, and Sankey and I received for the stock. I sold out. . . . As I remember that, the deal was made along sometime in the middle of May,.the 10th or 12th, but we did not get our money until along about the end of May. The abstracts of title, etc., had to be passed upon, and when that was done, of course, we got our money. . . . I stated that I received this money after the sale of the property. After everything was O. K.”

John E. Sankey was a witness and testified, in response to the inquiry as to who had negotiations withr him and Mr. Ryan relative to the purchase of his stock which he said he sold, at the time of the sale of the mine property, as follows: “Mr. Buckley. I owned 334 shares of stock. We sold our stock, we pooled our stock and really I don’t know who we sold it to, except our stock was bought and we received sixty-six thousand dollars; $22,000.00 went to me for my portion of the stock. When I speak of we, I mean Mr. Kapp, Mr. Ryan and myself. Mr. Buckley is who we dealt with but so far as who the stock was transferred to I don’t know about that, we turned our stock in. The stock certificates of 1,000 shares to Ryan, Kapp and myself were turned over to Mr. Buckley. This was before the sale of the Chicago-Williamsville mine to Mr. Pulliam. I had no negotiations with Mr. Pulliam myself. I had no negotiations with Mr. Pulliam relative to the sale of the Chicago-Williamsville mine. I actually don’t know what the purchase price was or how it was paid. I understand the basic price was $200.000 and that he had another understanding with another set of stockholders which of course — that is just hearsay. I only know what we received. Our dealings were with Mr. Buckley. It was a cash proposition with us, they tried to give us, and wanted us to take notes and one thing or another, but we gave them to understand that it would have to be cash and it was.” The witness also testified on cross-examination: “The mine was sold to Pulliam by the Chicago-Williamsville Coal Company May 29, 1920, and there was some dissension among the directors and stockholders and the money that I testified that we received is what I received when the mine was sold. ’ ’

George W. Hatch gave the following testimony in reference to the sale of the mine property: “I suppose the mine was sold to Leslie J. Pulliam or the Union Fuel Company. I don’t know how the transfer was made. I took two notes in payment for my stock. I could not tell you whether they were signed by the Union Fuel or L. J. Pulliam. I don’t know whether these notes were taken as consideration for the sale of the mine. I got this from Mr. Buckley, he owed me money. I did not get the check or notes from L. J. Pulliam or Union Fuel Company. I got them from Mr. Buckley. They were turned over to me by Buckley as payment for my stock.”

It is apparent from the testimony of the directors and stockholders referred to that the Chicago-Williamsville Coal Company disposed of and sold its mining property, which was situated in Sangamon county, to Leslie J. Pulliam for a consideration of $200,000 on or about the 29th day of May, 1920; that the property sold constituted the entire assets of the corporation, and that immediately after its' sale the Coal Company ceased to do business and practically passed out of existence; that the proceeds of the sale of the property was divided among the directors and stockholders of the company, William Eyan, John W. Kapp, Jr., John Sankey, George W. Hatch and Edgar H.- Buckley, and that they surrendered their stock therefor; that at the time of the sale of the property of the Coal Company and the division of the proceeds of the sale, among the directors and stockholders named, the complainant company had a valid and subsisting judgment against the Chicago-Williamsville Coal Company, amounting to the sum of $4,617.06, and legal interest thereon from the date thereof, April 14, 1924; and that by the sale in question no property or assets of the company remained for the payment of the judgment; and that by the sale and transfer of the Coal Company’s property and the division of the proceeds of the sale thereof among the directors and stockholders, the ChicagoWilliamsville Coal Company was rendered insolvent.

It is contended by the appellees that what they actually did was to take a part of the proceeds of the sale for their stock in the Coal Company; and that they are not liable to account for the money which they received, because they received it in payment for their stock. It may be said, concerning this contention, that the form of the transactions referred to does not change the character and effect thereof. And it is clear, from the evidence, that there was no actual sale of the stock; and there is no evidence of any purchaser of the stock, nor of any transfer to any purchaser, but the true nature of the transaction was a relinquishment of the stock for the proceeds of the sale of the mine property. It is also apparent from the evidence that the money or value which they received for their stock was not the money of a bona fide purchaser of the stock, but a part of the money realized from a sale of the property of the Coal Company. It is well settled that where a corporation, owing debts, sells all its property and its officers distribute its assets among its stockholders or otherwise misappropriate its assets, they may be held liable as trustees for the corporate debts. In Clapp v. Peterson, 104 Ill; 26, the court said concerning this matter: “In Sanger v. Upton, 91 U. S. 60, it is laid down: ‘The capital stock of an incorporated company is a fund set apart for the payment of its debts. It is a substitute for the personal liability which subsists in private co-partnerships. When debts are incurred, a contract arises with the creditors that it shall not be withdrawn or applied, otherwise than upon their demands, until such demands are satisfied. The creditors have a lien upon it in equity. If diverted, they may follow it as far as it can be traced, and subject it to the payment of their claims, except as against holders who have taken it bona fide for a valuable consideration and without notice. It is publicly pledged to those who deal with the corporation for their security.’ This doctrine is abundantly established by the authorities.” Beach v. Miller, 130 Ill. 162; Atwater v. American Exchange Nat. Bank, 152 Ill. 605; Singer v. Hutchinson, 183 Ill. 606; Standard Distilling & Distributing Co. v. Springfield Coal Mining & Tile Co., 239 Ill. 600.

For the reasons stated, we conclude that the court erred in finding that there was no equity in the complainant company’s bill and dismissing the same. The decree is therefore reversed and the cause remanded with directions to enter a decree requiring the defendants William Ryan, John W. Kapp, Jr., John Sankey, George W. Hatch and Edgar H. Buckley to pay the amount of the judgment of the complainant company with the accrued interest thereon by a short day to be fixed by the court; and that in default of such payment, that the court enter a judgment against the appellees for the amount of the judgment and the accrued interest thereon.

Reversed and remanded with directions.


text:
    Edward Levings et al., Executors, v. Joseph P. Wood et al., Appellants. Mary B. Carnahan and ten others, Appellees.
    Gen. No. 8,015.
    Opinion refiled April 12, 1928.
    Rehearing denied January 4, 1928.

      Atkirsor & Nichols, for appellants; C. T. Atkirsor and A. W. Nichols, of counsel.
    Trogdor & Dole, for executors.
    Actor, Actor & Sryder, for appellees; Charles McKright, Guardian ad litem.

   Mr. Justice Niehaus

delivered the opinion of the court.

In this case an appeal is prosecuted by Ada Wood Dodson, Otho Wood and Adria Wood Dodson, parties defendant in a bill of equity, from a decree of the circuit court of Edgar county, construing certain clauses of the last will and testament of John B. Wood, deceased. The testator died August 22, 1925, leaving an estate amounting to the sum of $337,836.86, which was specifically devised and bequeathed among his heirs at law and other beneficiaries named by him. His last will was duly probated in the county court of Edgar county and Edward Levings and Stephen I. Headley were appointed executors of the estate and duly qualified as such. Thereafter they filed a bill in equity for the construction of the will. The fifth paragraph of the will contains the clauses including a residuary clause, which are the subject of this controversy. These clauses are as follows:

“After all properties of my estate is sold; money collected, taxes, expenses and executors paid, I give and bequeath to each of my nephews and nieces as follows:
To Mary L. Wood the sum of Fifteen thousand dollars.
To Glenn C. Wood the sum of Fifteen thousand dollars.
To Jennie O. Wood the sum of Fifteen thousand dollars.
To Ada Wood Dodson the sum of Fifteen thousand dollars.
To Otho Wood the sum of Fifteen thousand dollars.
To Adria Wood Dodson the sum of Fifteen thousand dollars.
To Daniel B. Wood the sum of Ten thousand dollars.
To Edwin C. Wood the sum of Ten thousand dollars.
All of above parties of Bardstown, Kentucky.
“I also give and bequeath to the children or heirs of Jesse C. Buckler and Louisa Buckler, namely:
To Adria Buckler the sum of Five thousand dollars.
To Belvia Buckler the sum of Five thousand dollars.
To Jessie L. Buckler the sum of Five thousand dollars.
To Ona F. Buckler the sum of Five thousand dollars.
To Dennie Wood Buckler the sum of Five thousand dollars.
“The amount or legacy so bequeathed to the said Dennie Wood Buckler shall by his parents be deposited in Bank at interest, or may loan on real estate until said boy arrives at the age of twenty-one years. Should there be balance or remainder after all legacies are paid, it shall be equally divided between all those who have shared any part or parcel in my estate Executors and all shall share, and share alike.”

It appears from the evidence that Jonathan C. Wood, one of the brothers and legatees of the testator, and two of the other legatees, namely, Marcia Brown and Ona Buckler, were deceased at the time of the testator’s death; and it is conceded that in this situation the legacy to Jonathan-C. Wood of $25,000 and the legacy of $1,000 to Marcia Brown lapsed. The disputed question which arises concerning these lapsed legacies is whether they became a part of the residuary estate and are therefore governed by the residuary clause, which provided that £ 1 should there by a balance or remainder after all legacies are paid, it shall be equally divided between all those who have shared any part or parcel in "my estate Executors and all shall share, and share alike,” or are disposed of by section 11, chapter 39 of the Statute of Descent, Cahill’s St. ch. 39, ¶ 11. The decree appealed from finds that the lapsed legacies became a part of the residuary estate and that distribution should be made in accordance with the terms of the residuary clause of the will. The other controverted question which has arisen concerns the legacy of Ona F. Buckler, who prior to her death had become married to Howard Porter, and left her husband surviving and her son Howard Yernon Porter her heir at law. The chancellor construed the terms of the will pertaining to the legacy of Ona F. Buckler to mean that her heir at law became substituted for her and entitled to the legacy at her death, and so found in the decree. The language of the will however specifically gives this legacy to Ona F. Buckler as one of the children and heirs of Jesse C. Buckler and Louisa Buckler, and no provision is made in the will for vesting the legacy in her heir or heirs in case of her death before the decease of the testator. We are of opinion, therefore, that the legacy referred to lapsed, and that it is in the same legal category as the lapsed legacies of Jonathan C. Wood and Marcia Brown. This brings us to a consideration of the other controverted matter, namely, whether the lapsed legacies became a part of the residuary estate, or became intestate estate. Appellants contend that the remainder of the estate resulting from the lapsed legacies referred to, under section 11 of the Statutes of Descent, became intestate estate. Section 11 is as follows: “Whenever a devisee or legatee in any last will and testament, being a child or grandchild of the testator, shall die before such testator, and no provision shall be made for such contingency, the issue, if any there be, of such devisee or legatee, shall take the estate devised or bequeathed as the devisee or legatee would have done had he survived the testator, and if there be no such issue at the time of the death of such testator, the estate disposed of by such devise or legacy shall be considered and treated in all respects as intestate estate.” The language of this section indicates that it has reference particularly to devises" and legacies made to children or grandchildren of the testator, and this is the construction placed upon the section referred to by the Supreme Court. Gillette v. Plimpton, 253 Ill. 147; Brewick v. Anderson, 267 Ill. 169; Walker v. Walker, 283 Ill. 11. Inasmuch as none of the legacies in question were given to any children or grandchildren of the testator, we conclude that section 11 does not apply to the devises and legacies in question. It is apparent from the wording of the residuary clause that the testator did not intend-any part or parcel of his estate to become intestate property, but that it was his wish that, if there was any balance of his estate remaining after the legacies had been paid, it should be equally divided among all the persons who had shared any part or parcel of-his estate under his will, including the executors. Those who shared parts of his estate are Joseph P. Wood, Miriam S. Wood, Mary B. Carnahan, Mary F. Brown Roberts, William T. Moore, Mary J. Moore, Mary L. Wood, Glenn C. Wood, Jennie C. Wood, Ada Wood Dodson, Otho Wood, Adria Wood Dodson, Daniel B. Wood, Edwin C. Wood, Adria Buckler, Belvia Buckler, Jessie L. Buckler, Dennie Wood Buckler, J esse C. Buckler and Louisa Buckler; and the executors are Stephen I. Headley and Edward Levings. Each of the persons named therefore would be entitled to receive an equal share of the testator’s remaining estate.

For the reasons stated, we conclude that the finding-in the decree disposing of the legacy to Ona F. Buckler Porter to her son Howard Vernon Porter is erroneous, and that part of the decree is reversed and cause remanded with directions to enter a decree distributing the remainder of the estate resulting from the lapsed legacies, including the legacy to Ona F. Buckler, in accordance with the provisions of the residuary clause as herein stated.

Reversed in part and remanded with directions.

Additional Opinion on Denial of Petition fob ReHEABING.

in tlieir petition for renearing me appellants insist the court overlooked the applicability to this case of the law emphasized in Belleville Sav. Bank v. Aneshaensel, 298 Ill. 292, 303, where the court said: “It is a general rule that specific lapsed legacies fall into the general residuary fund and are to be distributed among the residuary legatees. There is an exception to this general rule, that when the legacies are given to several legatees and the residue is bequeathed to the same legatees it follows that the residue will not include a lapsed legacy to one of them.” The appellants argue that the present case comes within the exception pointed out. It will be noticed, however, that in this case the residue is not bequeathed to the same legatees to whom legacies are given in the will, but the two executors are also included to share as legatees in the distribtuion of the residue, and that, therefore, the exception referred to does not apply to this case.

The petition for rehearing is denied.