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    The Chicago Smelting & Refining Corporation, Appellee, v. Thomas H. Sullivan, trading as United Electric Service Company, Appellant.
    Gen. No. 31,674.
    1. Directing of verdict and demurrers to evidence — consideration of evidence favorable to party against whom motion is directed. On a motion to direct a verdict only that evidence can be considered which is in favor of the party against whom the motion is directed, and that evidence must be considered most favorable to that party with all legitimate inferences which may be drawn from it in his favor.
    2. Negotiable instruments — when notes held by holder in due course. Where a debtor pays a creditor by transferring to him a note of a partnership and the partnership, after making a partial payment to the holder, executes new notes to him in lieu of the prior notes, held the notes were owned by a holder in due course under section 52 of the Negotiable Instruments Act, Cahill’s St. ch. 98, ¶ 72.
    3. Evidence — bookkeeping records as admissions against interest. Where one seeks to show that liabilities of a partnership were taken over by an alleged succeeding corporation, a partnership trial balance prepared by the corporation and a corporation journal held admissible in evidence as admissions against the corporation’s interest, and not to be excluded under the theory that their accuracy was not certified to by the person who made them.
    4. Evidence — admissibility of telephone conversation. A telephone conversation was admissible in evidence where the person testifying to the conversation stated that he knew the conversation was with the same man to whom he had spoken in person.

      5. Evidence — admissibility of conclusions as to nature of transfer of a business. An attorney may not state his conclusions as to the nature of the transfer of a partnership business to an alleged succeeding corporation.

      6. Corporations — assumption of partnership liability as question for jury. An item in a statement of partnership liabilities assumed by a corporation of “Notes payable $74,048.88,” held, standing alone and unexplained, a sufficient basis for a jury to infer that the item included $1,500 of partnership notes which the defendant, in an action by the corporation, holds and seeks to use as a set-off to the corporation’s claim against him.
    7. Corporations — vmplied assumption of partnership debts. Semble, where it appears that a corporation is organized to take over and continue the business of a firm, that the former partners are the only members of the corporation, that the assets of the partnership have been transferred to the corporation for the continuance of the business in exchange for stock and without other consideration and that the members of the partnership may be said to have simply put on a new coat, the corporation thereby impliedly assumes the partnership debts and is prima facie liable therefor.
    Appeal by defendant from the Municipal Court of Chicago; the Hon. Max Luster, Judge, presiding.
    Heard in the first division of this court for the first district at the March term, 1927.
    Reversed and remanded.
    Opinion filed December 12, 1927.
    Rehearing denied December 27, 1927.
    Harold J. Finder, for appellant.
    Benjamin B. Morris, for appellee.
   Mr. Justice McSurely

delivered the opinion of the court.

Defendant seeks the reversal of an adverse judgment for $1,600.20 entered upon a verdict instructed by the court. This case has already been before this court — 240 Ill. App. 677.

Plaintiff commenced his action to recover for goods sold and delivered to defendant. Defendant filed an affidavit of merits and a plea of set-off. On the prior appeal the sufficiency of the plea of set-off was questioned but held sufficient and the cause remanded. When it was tried defendant admitted the amount of plaintiff’s claim but asserted a set-off of $1,500, arising from three promissory notes for $500 each, signed by the Chicago Smelting & Refining Company, a partnership, by L. C. Robinson, one of the partners. The claim of set-off alleged that Louis C. Robinson and Hyman Feinberg were copartners trading under the firm name of the Chicago Smelting & Refining Company, and were indebted to the defendant on the partnership notes to the amount of $2,000; that subsequently, September 21, 1923, $500 was paid on account and three new notes were made by the Chicago Smelting & Refining Company for $500 each, for the balance due, which were delivered to and accepted by the defendant. It was further alleged that on November 21, 1923, the partnership business of the Chicago Smelting & Refining Company became incorporated under the corporate name of the Chicago Smelting & Refining Corporation, and that the corporation took over the business, property and assets of the partnership and assumed to pay the obligations of said partnership as conducted prior to the incorporation.

The trial court was apparently of the opinion that the evidence did not prove that the plaintiff corporation had assumed the liabilities of the prior partnership and directed a verdict accordingly. It is the established rule that on motion to direct a verdict only that evidence can be considered which is in favor of the party against whom the motion is directed, and that evidence must be considered most favorably to that party, together with all legitimate inferences which-may be drawn from it in his favor. Shannon v. Nightingale, 321 Ill. 168.

The evidence tended to show that the plaintiff was incorporated under the name of the Chicago Smelting & Refining Corporation on November 21, 1923; that for several years prior thereto Louis C. Robinson and Hyman Feinberg were engaged in the smelting and refining business under the firm name of Chicago Smelting & Refining Company at 2457-2469 South Loomis street, Chicago; that the Arthur Storage Battery Supply Company, a corporation, had certain business dealings with the defendant, out of which there grew an indebtedness to him which was paid by the indorsement of the Arthur Company and the delivery to defendant of a note for $2,000, made by the Chicago Smelting & Refining Company, the partnership. The defendant indorsed and discounted this note at his bank. September 21, 1923, the partnership paid $500 on the note, and to take up its prior note made and delivered to defendant three $500 notes, which defendant claims should be set off against plaintiff’s claim. Defendant indorsed these notes and deposited them in his bank. They were not paid at maturity and the amount thereof was charged by the bank to defendant’s account.

The plaintiff corporation was organized with an authorized capital stock of $100,000, divided into 1,000 shares of $100 par value per share; one share was issued to Fannie Feinberg, wife of Hyman Feinberg; one share was issued to Louis S. Gribson, who was the attorney for the partnership and afterwards the secretary and attorney for the corporation; and 998 shares were issued to Hyman Feinberg. These were paid for "with the property of the partnership, which included the real estate where it had been doing business at 2457-2469 South Loomis street, and all book accounts of the partnership, stock of metals, machinery fixtures, equipment, automobile trucks, notes receivable, choses in action, prepaid insurance, “including the entire business heretofore conducted by the Chicago Smelting & Refining Company at 2457 S. Loomis St., Chicago.” The real estate transferred is the same which the partnership acquired by purchase in 1918. On October 12, 1923, the partnership also borrowed money secured by a trust deed on said real estate. A recorded deed from Feinberg shows a conveyance of his one-half interest in the real estate to the corporation on March 14, 1924; and a recorded deed from Robinson and his wife shows a conveyance of the former’s one-half interest in the real estate to Feinberg on June 24, 1924. Sometime in October, 1923, Robinson left Chicago and did not return for about a month or five weeks later. During his absence the corporation was formed and the partnership business turned over to it. The record does not show any agreement by Robinson and Feinberg to dissolve the partnership.

Minutes of the meeting of the directors of the corporation were introduced, showing that all the property and business of the partnership were taken over by the corporation and that the corporation took over the “assets and the liabilities shown on the accompanying balance sheet.” Plaintiff’s bookkeeper, in response to a subpoena duces tecum issued at defendant’s instance, produced a trial balance of the partnership dated October 31, 1923, and also the journal of the plaintiff corporation. The court refused to receive them in evidence, but they are in the record marked for identification.

As there must be another trial, we shall not detail the evidence at greater length.

It is first said by the plaintiff that the defendant, Sullivan, is not a holder in due course of the notes involved in this suit. By section 52 of the Negotiable Instruments Act, Cahill’s St. ch. 98, ¶ 72, a holder in due course is defined to be a holder who takes the note, which is complete and regular upon its face, before it is overdue and without notice that it has been previously dishonored, if such is a fact, and that he took it in good faith and for value and without any notice of any infirmity in the instrument or defect in the title of the person negotiating it. The evidence tends to show that Sullivan took the note for $2,000 in good faith and for value as part of his dealings with the Arthur Storage Battery Supply Company in payment of its indebtedness to him and that subsequently the Chicago Smelting & Refining Company, acting through one of its partners, Louis C. Robinson, paid $500 on account and executed three new notes for $500 each to cover the balance. These were delivered to the defendant and are the notes in issue. There is nothing in the record to impair the integrity of defendant’s title to the notes.

The court erroneously excluded the trial balance and the journal of the plaintiff called for under the subpoena duces tecum. These seem to have been excluded upon the theory that their accuracy was not testified to by the.person who made them. This was a misconception of the rule. The papers excluded were made by the plaintiff and their contents were in the nature of admissions against interest. They were clearly competent.

The court erroneously excluded telephone conversations between the defendant and Feinberg — some of them prior to the incorporation of plaintiff and one of them sometime after the incorporation. In these conversations Feinberg told Sullivan, in substance, that “the notes would be paid in a short while.” Sullivan telephoned to Feinberg’s office and also had a conversation in person with him in defendant’s office. Defendant testified that he knew that his telephone conversations were with the same man to whom he spoke in person in his office. Under such circumstances the telephone conversations should have been admitted. Godair v. Ham Nat. Bank, 225 Ill. 572; Trapp v. Rockford Electric Co., 186 Ill. App. 379.

It was also reversible error to permit Mr. Gribs on, the attorney for plaintiff, to state his conclusions as-to the nature of the transfer of the business of the Chicago Smelting & Refining Company to the corporation.

The minutes of the meeting of the corporation indicated that the corporation not only took over the assets of the partnership but also the liabilities as shown by another paper, defendant’s Exhibit I, which was excluded by the court but is in the record for identification. This purports to show not only the assets taken over but also the liabilities assumed, which included one item, “Notes payable $74,048.88.” Standing alone and unexplained, this would be a sufficient basis for the jury reasonably to infer that it included the notes delivered to the defendant and which are the subject of the set-off.

We are asked to hold that, where a corporation is organized to take over and continue the business of a firm and all of the firm’s assets are transferred to it in exchange for its stock, the debts and obligations of the partnership become the debts and obligations of the corporation without any express agreement to assume the liability. We recognize a conflict of decisions on this point. So far as we are informed it has never been directly decided by our Supreme Court. We are disposed to be in accord with the conclusion expressed in the opinion of another division of this court in Acorn Lumber Co. v. Friedlander Box Co., 240 Ill. App. 425, and to hold that, where the former partners are the only members of the corporation and the assets of the partnership have been transferred to the corporation for the continuance of the business in exchange for stock and without other consideration, and where, to use the apt words in the opinion in Andres v. Morgan, 62 Ohio, St. 236, “the members of the partnership may be said to have simply put on a new coat,” the corporation thereby impliedly assumes the partnership debts and is prima facie liable therefor. This may be obiter dictum, as upon the second trial, as we have indicated, there may be competent evidence showing an express agreement by the corporation to assume the liabilities of the partnership.

For the reasons above indicated the judgment is reversed and the cause remanded.

Reversed and remanded.

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


source: Caselaw Access Project

author: Mr. Justice O’Connor

license: Public Domain

text:
    H. W. Caldwell, Appellee, v. Henry Hornblower et al., Appellants.
    Gen. No. 31,644.
    1. Brokers — stock exchange rule as to delivery of stock not applied to prior transaction. A rule of a stock exchange that “until further notice transactions in the Mercer Motors Company common stock may be settled by delivery” of voting trust certificates, does not, in the absence of any explanation as to the method of doing business, apply to require a purchaser of common stock of that company to accept voting trust certificates from his broker whom he had requested to purchase common stock thirty-five days before the adoption of the rule.
    2. Brokers — when stockbroker’s purchase of voting trust certificates in place of common stock not harmful to his customer. Where a stockbroker is ordered by a customer to purchase common stock and thereafter to sell such stock and, upon the broker requesting the customer to indorse certificates so delivery of the same may be made to close the deal, the customer discovers that voting trust certificates have been purchased instead of common stock and refuses his indorsement, and, after tendering common stock to the broker to cover the sale which showed a loss on the deal, seeks to recover from the broker the money given the broker to make the purchase, claiming that the order was not complied with by the purchase of voting trust certificates, held no recovery could be had, it appearing that the sale could be cleared by the delivery of voting trust certificates.
    Appeal by defendants from the Municipal Court of Chicago; the Hon. Daniel P. Trude, Judge, presiding.
    Heard in the first division of this court for the first district at the March term, 1927.
    Reversed.
    Opinion filed December 12, 1927.
    Rehearing denied December 27, 1927.
    Dent, Dobyns & Freeman, for appellants.
    Gallagher, Kohlsaat, Rinaker & Wilkinson, for appellee; Arthur R. Hall, of counsel.
   Mr. Justice O’Connor

delivered the opinion of the court.

Plaintiff brought suit against defendants to recover $6,872.50, which he claimed to have given the defendants, who were stockbrokers, in payment of stock purchased by them for him, and that the defendants tenddered to him certain voting trust certificates in lieu of the stock, which he refused to receive and demanded the return of his money, together with interest thereon of $1,259.94, making a total claim of $8,132.44. On the trial of the case before the court, without a jury, there was a finding and judgment in plaintiff’s favor for the amount of his claim, and the defendants appeal.

The record discloses that the defendants were stockbrokers with offices in Chicago and several other cities; that on February 8, 1923, plaintiff instructed the defendants, through their Chicago office, to purchase for him 1,500 shares of common stock of the Mercer Motors at $3 a share; that the purchase was made, plaintiff notified, and he paid the purchase price of $4,500 for the stock, together with $82.50 brokers ’ commission ; that on the next day, February 9, 1923, plaintiff instructed the defendants to purchase for him 1,000 shares of the same stock at $2.25 a share. The purchase was made, plaintiff notified, and he paid the defendants the purchase price of the stock, together with commissions. The evidence further shows that the Mercer Motors stock was traded in only on the New York Curb and subject to the rules of that curb, and that plaintiff knew of this fact; that in addition to the stock of the Mercer Motors there were voting trust certificates of the same company being dealt in on the New York Curb at the same time; that on March 15, 1923, the proper authorities of the New York Curb passed a rule which provided that “The Committee on Listing Securities rules that Until further notice transactions in the Mercer Motors Company common stock may be settled by delivery either of Temporary common Stock Certificates or Temporary Voting Trust Certificates,” and five days later, on March 20th, a further rule was passed providing that in the event of voting trust certificates being delivered against transactions in the common stock, the seller should pay four cents per share to cover the Federal and State taxes which were to be levied' against the exchange of voting trust certificates for common stock certificates.

It further appears that after the passage of the above rules there was delivered to the defendants in fulfillment of the 2,500 shares of common stock purchased by them for plaintiff, 500 shares of the common stock and 2,000 shares in the form of voting trust certificates, and the defendants also received $80 to cover the transfer fee of four cents a share, as provided by the rule of March 20th above quoted.

On March 28th plaintiff instructed the defendants to sell the 2,500 shares of common stock at $1% per share and the instruction was at once carried out and the stock sold. On the next day, March 29, 1923, defendants requested plaintiff to come to their Chicago office to indorse his name on the back of the 500' shares of stock and the 2,000 voting trust certificates so that it could be delivered to the purchaser of the 2,500 shares of stock sold by the defendants for plaintiff on March 28th. Plaintiff called at defendants’ office for this purpose, but when he learned that the defendants did not have 2,500 shares of the common stock but only 500 shares, and 2,000 voting trust certificates, he refused to indorse them because, as stated by him, he had bought 2,500 shares of stock and not voting trust certificates. Plaintiff left defendants’ office and on the same day wrote them a letter stating that on February 8th and 9th he had ordered the defendants to purchase the stock as above set forth, and on March 28th had instructed them to sell 2,500 shares of stock at $1⅜ per share, and that he had been notified by defendants that this had all been done; that upon calling at defendants’ office at their request, he was offered 2,000 shares of voting trust certificates; that he refused to accept or indorse them, and stated: “Inasmuch as the order was not filled in accordance with my instructions, I request that you hereby consider the order cancelled.” Afterwards, the exact date not appearing, plaintiff delivered to defendants certificates for 2,500 of the common stock of the Mercer Motors Company which he had purchased from persons other than the defendants, so that the defendants could deliver the certificates on the sale made March 28th. This tender defendants were compelled to accept to close the deal. It further appears that the 500 shares of stock and the voting trust certificates were still in the possession of the defendants at the time of the trial, they not being able to do anything with them unless plaintiff would indorse them, the certificates and stock being in plaintiff’s name.

The defendants contend that the judgment is wrong and should be reversed because under the law a person employing a broker to deal for him on the stock exchange is bound by the rules of such exchange; that on March 15th, when the committee of the New York Curb passed the rule above quoted, it was binding upon plaintiff, and although the defendants had purchased for plaintiff the common stock of the Mercer Motors Company, yet under the rule they were obliged to take voting trust certificates if such were delivered to them in fulfillment of the purchases. The rule of law is as stated by counsel for the defendants, but we think it is not applicable in the instant case. The 2,500 shares of stock were purchased on February 8th and 9th and the rule was not passed until about 35 days thereafter —March 15th — and we think the rule is so worded as to apply only to transactions made after its enactment. It provides that “until further notice transactions in the Mercer Motors Company common stock may be settled by delivery” of voting trust certificates. In the absence of any explanation as to the method of doing business, we hold that the rule does not apply to the transactions of February 8th and 9th.

Plaintiff’s position is that the failure of defendants to procure common stock was caused by their negligence in failing to act promptly after the purchases were made on February 8th and 9th; that if the defendants had acted promptly, common stock certificates could have been obtained before the passage of the rule of March 15th, and that the failure of the defendants to obtain the stock for him entitled him to the return of his money. In the view we take of the case it will be unnecessary for us to pass upon the question as to whether the defendants were negligent as contended by plaintiff, because we are of the opinion that plaintiff cannot recover in any view of the case. The facts are stipulated and from them it appears that the defendants purchased common stock on the 8th and 9th of February as plaintiff ordered. It further appears from the stipulation that on March 28th, at plaintiff’s request, the defendants sold the 2,500 shares of common stock which they had purchased for him. Plaintiff had paid for the stock $6,750, and it had been sold at his request for $3,437.50, so that plaintiff had lost on the transaction, exclusive of brokers’ fees, $3,312.50. The facts as stipulated show that the sale of the 2,500 shares of stock on March 28th could be cleared and closed by the delivery of 500 shares of common stock and the 2,000 shares of the voting trust certificates. Plaintiff’s refusal to make the indorsement for the reason given by him was but a mere subterfuge in the hope that he might escape the loss he had already sustained. There is no merit in his contention.

The judgment of the municipal court of Chicago is reversed, but since plaintiff cannot recover the cause will not be remanded.

Judgment reversed.

Matchett, P. J., and McSurely, J., concur.


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    Sears Roebuck & Company, Appellee, v. C. J. Wolf et al. C. J. Wolf, Appellant.
    Gen. No. 31,710.
    1. Agency — liability of members of charitable committee for goods pm-chased. Where goods are sold to a committee which is disbursing funds donated by the public for charitable purposes, and the agreement is that the seller looks solely to the fund for his payment, the individual members of the committee cannot be held liable.
    2. Agency — liability of member of charitable committee to reimburse seller on rescission by committee on sale of goods) to it. Where a sale of goods to a committee, which is disbursing funds donated for charitable purposes, is rescinded under an agreement with the seller that he will be reimbursed for the expense of the sale, and the committee knowing that the seller may have such a claim disburses the entire fund without inquiry, held that a judgment against a member of the committee for its seller’s expense would be sustained.
    3. Trial — ruling of court limiting recovery to one item as not invading province of jury. In an action by a seller to recover the expenses incurred in the sale of goods which had been rescinded by the buyer, a ruling of the court that he would exclude all claims except the freight, held not to invade the province of the jury to decide the amount of the freight.
    4. Pleading — plea denying joint liability not warned by general issue. A special plea of a defendant denying his joint liability on a contract incurred by a committee is not waived by his filing a plea of the general issue in addition, in view of Cahill’s St. ch. 110, ¶ 54.
    5. Appeal and error — contention not considered on appeal if not urged at trial. A member of a committee, the sole defendant served in an action against all the members on a joint obligation, is not in a position to contend on appeal from a judgment against himself that the evidence did not tend to prove the joint liability of all the defendants where no such contention was made upon the trial.
    6. Pleading — failure to verify plea not met by affidavit of merits. Failure of a defendant to verify his plea of nonjoint liability on an obligation, as required by Cahill’s St. ch. 110, ¶ 54, is not met by an affidavit of merits.
    Appeal by defendant from the Circuit Court of Cook county; the Hon. John A. Swanson, Judge, presiding.
    Heard in the first division of this court for the first district at the March term, 1927.
    Affirmed,
    Opinion filed December 12, 1927.

      Rankin & Lustfield, for appellant; Ode L. Rankin, of counsel.
    Adler, Lederer & Kahn, for appellee.
   Mr. Justice O’Connor

delivered the opinion of the court.

Plaintiff brought suit against C. J. Wolf and a number of other persons who, it was alleged, were officers or members of the West Suburban Tornado Relief Committee, a voluntary unincorporated association, to recover $823.17 claimed to be due and owing to plaintiff for freight charges and other expenses incurred in connection with the sale by plaintiff of ten portable houses to the defendants. The case was tried and there was a verdict and judgment in plaintiff’s favor against the defendant C. J. Wolf for $467.08 and he appeals.

The record discloses that on March 28, 1920, there was a tornado which caused a great deal of damage in a number of suburbs lying west of Chicago, and that to relieve the situation a committee was formed to take charge of the matter. A number of persons from each of the suburbs were placed upon the committee, of which the defendant Wolf was chairman. He was a resident of Melrose Park and president of that village and was also president of the Citizens State Bank there located. A number of homes had been destroyed by the tornado and to afford relief it was decided to purchase ten portable houses from plaintiff and this was accordingly done. J. B. Lee, who was appointed chairman of the housing committee, acting under the general committee of which the defendant Wolf was, as stated, general chairman, purchased the portable houses, which were at Cairo, Illinois. The houses were immediately forwarded by freight and at about the time they arrived at destination plaintiff was advised that on account of some labor difficulty over which defendants had no control, they would not be able to make use of the houses and plaintiff was requested to cancel the order — to take back the houses. Plaintiff, seeing the situation, agreed to the proposition upon condition that it be paid the expenses incurred and to be incurred in bringing the houses to the Chicago suburb and in disposing of them, and this was agreed to. The houses were taken back by the plaintiff and afterwards sent by it to Akron, Ohio, where plaintiff, apparently, disposed of them. It is to recover the freight and expenses incurred that plaintiff brought this action.

Plaintiff offered evidence tending to show the expenses it had been put to, but the court ruled that no recovery could be had except for the freight paid by plaintiff to the railroad company for transporting the houses from Cairo to the Chicago suburb and the return of the houses to Cairo. Plaintiff also offered evidence to the effect that the freight charge from the Chicago suburb to Akron was substantially the same as that between Cairo and the Chicago suburb.

The defendant Wolf was the only defendant who was served by the sheriff and the only defendant who entered his appearance, so that when the case was tried he was the only defendant before the court. He offered evidence tending to show that the purchase of the ten portable houses was authorized for $6,340, and that when the committee encountered labor troubles, the chairman of the housing committee, J. B. Lee, was instructed to take the matter up with plaintiff with a view of having the contract rescinded and the houses taken back by plaintiff, without expense to the committee if possible, but that if plaintiff insisted upon payment of costs and charges, Lee was authorized to agree to pay them. It further appeared from the evidence that the committee of which defendant was the chairman received and disbursed about $102,000, and the defendant Wolf gave evidence to the effect that the last of the money had been disbursed during the first part of September, 1920, and that he did not learn of plaintiff’s bill until about December 10, 1920. The evidence further tended to show that plaintiff had mailed its bill to Mr. Lee on July 7, 1920, and had at the same time sent a copy of the bill to defendant Wolf, addressed to the West Suburban Tornado Relief Committee, Melrose Park, Illinois. Wolf testified that he did not receive the bill and had not been informed by Lee that Lee had received the bill; that Lee had severed his connection with the committee about the first of June on account of ill health, had gone south and some time thereafter, but prior to the trial, died. The evidence further shows that in December, 1920, representatives of the plaintiff took the matter up with Wolf in an endeavor to have plaintiff’s bill paid and that Wolf thereafter endeavored to get his committee together to take action in the matter, but without success; that numerous negotiations took place, covering a period of several months, but no payment was made.

The defendant contends that the judgment is wrong and should be reversed because the evidence shows that plaintiff was dealing with a committee which was disbursing public donations for charitable purposes, and therefore plaintiff must look to the fund and not to the individual liability of the members of the committee. In support of this proposition Story on Agency (sec. 287), Little Rock Furniture Mfg. Co. v. Kavanaugh, 111 Ark. 575, 581; Trantom v. Fallon, 12 La. Ann. 25, are cited. The law seems to be well settled that where goods are sold to a committee which is disbursing funds appropriated for charitable purposes, such as in the instant case, and the agreement is that the seller looks solely to the fund for his payment, the individual members of the committee cannot be held liable. While there is evidence tending to show that plaintiff was looking to the fund for its payment, yet upon a consideration of all the evidence a different view might well be taken; and in this circumstance the question was a proper one for the jury. The court instructed the jury that if they believed from the evidence that plaintiff extended credit to the West Suburban Tornado Relief Committee solely in reliance upon the funds collected, then their verdict should be for the defendant, Wolf. The jury by their verdict found in effect that plaintiff did not look solely to the fund', and we cannot say that such finding is manifestly against the weight of the evidence.

In the Kavanaugh case above referred to, it was held that a committee of citizens, acting in behalf of a municipality to make arrangements for the entertainment of an organization, was not personally liable for expenses incurred where the committee had equitably disbursed the fund, giving each creditor his pro rata share of it. In the instant case the evidence shows that Lee was authorized to incur the liability involved. There is the testimony of Wolf himself that he knew the portable houses had been purchased and he told Lee to rescind the sale without expense to the committee, but if this could not be done to agree to pay plaintiff the expenses it had incurred. Wolf knew that Lee had left the committee in the early "part of June but he did not advise plaintiff of this fact. Plaintiff mailed its bill on July 7th to Lee. The testimony also is that it mailed a copy of the bill to Wolf in care of the committee at Melrose Park. Wolf testified that he never received this bill and did not know that the bill had been sent to Lee, yet knowing that probably plaintiff would have a claim, the committee disbursed all of the fund without making any inquiry. In these circumstances we think we would not be warranted in disturbing the judgment.

Defendant further contends that the court invaded the province of the jury in deciding that the amount of the freight was $467.08. We think this contention is without merit. The court on the hearing stated that he would exclude all claims of plaintiff hut the freight, which was $467.08, and the ruling appears to have met with the approval of defendant, because plaintiff was making claim for more than $800.

A further point is made that the judgment is. wrong because plaintiff brought suit against Wolf, together with 19 other persons as officers or members of the West Suburban Tornado Relief Committee; that only Wolf was served, the other members not appearing; that plaintiff made no proof as against any of the defendants except Wolf, and that plaintiff was required to do this since the defendant had filed a verified plea denying his joint liability. In reply to this contention plaintiff takes the position that the defendant Wolf, by filing a plea of the general issue, waived the special plea denying his joint liability, and in support of this cites the case of Green v. Shaw, 66 Ill. App. 74. We think defendant’s contention must be sustained. In the Green case it was held, as plaintiff contends, that where a defendant files a verified plea denying joint liability with other defendants, and also pleads the general issue, he waives his right to insist upon plaintiff proving the joint liability with the other defendants. The court there said (p. 76): “But in addition to that plea he pleaded the general issue * * *. By pleading the general issue he waived his right to insist upon the plaintiff’s proving his joint liability with the other defendants.” In that case the court cited in support of its holding, Warren v. Chambers, 12 Ill. 124, in which case the court quoted section 8 of chapter 40 of the Revised Statutes, which is now section 54 of our Practice Act, Cahill’s St. ch. 110, ¶ 54, with some changes to be hereinafter noted. The section quoted in the Warren case is as follows: “In actions upon contracts expressed or implied, against two or more defendants, as partners, or joint obligors or payors, proof of the joint liability or partnership of the defendants, or their Christian or surnames shall not, in the first instance, be required, to entitle the plaintiff to judgment, unless such proof shall be rendered necessary by pleading in abatement, or the filing of pleas denying the execution of such writing, verified by affidavit, as required by law.” Section 54 of our present Practice Act, Cahill’s St. ch. 110, ¶ 54, is as follows: “In actions upon contracts, expressed or implied, against two or more defendants, as partners or joint obligors or payors, whether so alleged or not, proof of the joint liability or partnership of the defendants, or their Christian or surnames, shall not, in the first instance, be required to entitle the plaintiff to judgment, unless such proof shall be rendered necessary by pleading in abatement, or unless the defendant shall file a plea in bar, denying the partnership, or joint liability, or the execution of the instrument sued upon, verified by affidavit.” It will be noted that in the present act it is provided that the defendant may file a plea in bar, denying the partnership or joint liability, so that under the present statute a plea denying joint liability is designated a plea in bar and not a plea in abatement, as was the case in the statute before amendment. The holding in the Green case was in effect that a plea in abatement was waived by filing a plea in bar, but the statute has since been changed as above noted. Moreover, even before the statute was changed our Supreme Court in the case of Stills on v. Hill, 18 Ill. 262, held that a plea in abatement denying a copartnership by one of several defendants was not waived by the same defendant filing a plea in nonassumpsit. We therefore hold that the defendant did not waive its plea of non joint liability by filing, in addition, the general issue. But we are also of the opinion that the defendant is not in a position to contend that the evidence did not tend to prove the joint liability of all the defendants, because a careful examination of the record fails to disclose that any such contention was made upon the trial but, on the contrary, instructions offered and given at the request of the defendant were all on the theory that such proof had been made. The court was requested by the defendant to instruct the jury that if they believed from the evidence that the plaintiff had extended credit to the Western Suburban Tornado Relief Committee, looking to the fund for its payment, and that credit was not extended to the defendants personally, then plaintiff could not recover. The court modified this to the effect that the verdict should be for the defendant unless the jury found from the evidence that plaintiff looked solely to the fund. And by instruction 4 as modified and given the jury were told that if they believed from the evidence “that the plaintiff extended credit to the defendant, Charles J. Wolf, and the other persons sued herein,” etc. It will be seen that these instructions were given on the theory that there was evidence warranting the giving of them, and that plaintiff had introduced evidence against all the defendants, and having taken that position on the trial defendant cannot shift his position in this court and now contend that there was no evidence against some of the parties sued. But in no event could defendant’s position be sustained, because, upon looking into the record, we find that defendant’s plea of non joint liability is not verified, as required by the statute (section 54, chapter 110, R. S., Cahill’s St. ch. 110, ¶ 54). The only affidavit following the pleas is an affidavit of merits. This is insufficient under the plain wording of the statute and under the authorities. Stocker v. Leonard Machinery & Tool Co., 231 Ill. App. 206; Hansen v. Hale, 44 Ill. App. 474; Lord & Thomas v. Sanitary Drinking Cup Co., 191 Ill. App. 150.

The judgment of the circuit court of Cook county is affirmed.

Affirmed.

Matchett, P. J., and McSurely, J., concur.


text:
    The Fair, Appellant, v. The Estate Stove Company, Appellee.
    Gen. No. 31,733.
    1. Contracts — necessity that both promises bind in bilateral agreement.' In a bilateral agreement both promises must be binding or neither is binding.
    2. Contracts — when contract does not give arbitrary right to reject order. Under a contract whereby a stove manufacturer agrees to deliver to a retail store orders for stoves that are subject to the approval of the credit department of the store with respect to the credit of purchasers making deferred payments, the credit department must act reasonably in passing upon the credit of a purchaser, and the contract therefor cannot be held invalid for lack of a valid consideration on the theory that the store can arbitrarily reject any order and is not bound by the contract.
    Matchett, P. J., dissenting.
    Appeal by plaintiff from the Superior Court of Cook county; the Hon. Joseph B. David, Judge, presiding.
    Heard in the first division of this court for the first district at the March term, 1927.
    Reversed and remanded.
    Opinion filed December 12, 1927.
    Dent, Dobyns & Freeman, for appellant.
    Moses, Kennedy, Stein & Bachrach, for appellee; Hamilton Moses and Walter H. Moses, of counsel.
   Mr. Justice O’Connor

delivered the opinion of the court.

Plaintiff brought an action of assumpsit to recover' damages for the alleged breach of a contract. The declaration in two special counts declared on a written contract. In addition the plaintiff filed the common counts. A demurrer was sustained to the two special counts. The cause was then submitted to the court without a jury and after hearing the court found the issues in favor of the defendant and plaintiff appeals.

The record discloses that on the trial plaintiff offered the written contract declared on in the first two special counts as the basis of its cause of action under the common counts. The court excluded the contract on the ground that it was void for want of consideration, and plaintiff having no evidence to sustain its claim, the finding and judgment in favor of the defendant followed.

The sole question involved in this case is whether the written document signed by plaintiff and defendant is a valid and binding contract. Counsel for the defendant state that “The trial court held this agreement void for want of mutuality of obligation and lack of consideration,” but we think the ruling of the trial judge was that the contract was unenforceable because there was no valid consideration. In Vol. 1 Williston on Contracts, sec. 140, the author states that where it is said a contract is unenforceable for want of mutuality, such statement is likely to cause confusion and is unnecessary.

The record discloses that plaintiff owns and conducts a retail department store in Chicago; that defendant was an Ohio corporation for the manufacture of stoves, and desired to have them sold by plaintiff; that on October 28, 1925, both parties executed a written agreement, the interpretation of which is the subject matter of this suit. It appears from the evidence that after the execution of the contract and in accordance with its terms, defendant employed salesmen to solicit sales for its stoves, the sales to be made in the name of plaintiff; that orders were taken for the sale of 26 stoves, cash payment was made, and the deferred payments were apparently evidenced by promissory notes, which were delivered by the defendant to the plaintiff and accepted by the latter. It further appears that although the written contract called for 120 orders for the stoves, defendant procured but 26 and refused to proceed further with the solicitation of orders. Afterwards plaintiff brought the instant case to recover damages for defendant’s alleged failure to procure the remaining 94 orders.

Defendant contends that the judgment is right and should be affirmed because by the terms of the contract it was required to procure orders ‘ ‘ acceptable to The Fair”, (plaintiff), and that plaintiff could arbitrarily reject any orders given; that it was not obligated to accept any orders the defendant might procure and therefore the contract was void for lack of consideration. Of course it is axiomatic that in a bilateral agreement both promises must be binding or neither is binding. Section 103e, 1 Williston on Contracts. We are, however, unable to agree with defendant’s contention, but are of the opinion that the meaning of the contract is that the plaintiff would not be warranted in rejecting an order tendered by the defendant unless it acted reasonably and in good faith. The material portions of the contract are as follows:

“3. The Company (defendant) further agrees that the men so employed by it will procure, and it will deliver to The Fair on or before December 31, 1925, signed orders acceptable to The Fair, together with first cash payments, and duly executed promissory notes for unpaid balances on such orders, covering one hundred and twenty (120) Estate Heatrolas.
‘ ‘ 6. All deferred payment contracts delivered hereunder shall be subject before acceptance to the approval of the Credit Department of The Fair with respect to the credit standing and reputation of the purchaser and the contract forms used shall expressly so state.”

We think the fair interpretation of these two paragraphs is that where the defendant procures an order and tenders it with the first cash payment and promissory notes, as provided in paragraph 3 of the contract for acceptance as provided in paragraph 6 of the contract, the credit department must act reasonably in passing upon the credit of the person executing the order, and that it has no right to arbitrarily refuse to accept order's. With this construction the contract is of course valid and enforceable. Keeler v. Clifford, 165 Ill. 544; Union League Club v. Blymyer Ice Mach. Co., 204 Ill. 117; Gibb v. Irving Park Dist., 197 Ill. App. 480; Bishop v. Bloomington Canning Co., 307 Ill. 179.

In the Keeler case the contract provided that certain grading was to be done by one of the parties “to the satisfaction” of the other; and it was held that a proper construction of the contract was that in determining whether the work was done to the satisfaction of the party, the latter must act as a reasonable person. The court there said (pp. 548-49): “This instruction told the jury, that if they should find from the evidence, that the work which was performed by the plaintiff, and the grading done by him, were not done to the satisfaction of the defendant, then their verdict should be in favor of the defendant. This instruction was improper, because, where a contract is required to be done to the satisfaction of one of the parties, the meaning necessarily is, that it must be done in a manner satisfactory to the mind of a reasonable man; the plain construction of the contract in this regard is, that the work was to be completed in accordance with the contract, in such a manner that appellant, as a reasonable man, ought to be satisfied with it.”

In the Union League Club case, the Ice Machine Company had sold it a certain machine. The contract of sale provided, inter alia: “We also agree that, in case the machine proves unsatisfactory for any other cause than those above stated, we shall remove it from said premises, replacing the boxes in the same condition in which they were when we entered the premises, and it shall be optional with the said Union League Club to accept and pay for the machine or not, as it may please.” It was held that this provision did not give the Union League Club the arbitrary right to reject the machine, but its rejection should be placed upon some reasonable ground.

In the Gibb case the late Mr. Justice Baker in delivering the opinion of the court said (p. 481): “Where a contract provides that services to be performed must be satisfactory to the employer, such clause means that the services should be such that as a reasonable person the employer ought to be satisfied therewith. Keeler v. Clifford, 165 Ill. 544.”

In the Bishop case the contract under consideration provided: “It is further agreed that in event results are unsatisfactory to either party, either from standpoint of financial profits or for any other good or sufficient reason, cancellation of the contract or agreement can be effected by the giving of written notice ’ ’; and it was held that to warrant the Canning company in refusing to permit Bishop to continue his services for it, the Canning company must act in good faith and without fraud.

Counsel for the defendant have written an able brief and submitted many authorities from this and other States tending to sustain their view of the matter. We' think it would serve no useful purpose to discuss these authorities as, obviously, they must all be considered in view of the particular contracts involved. But we are of the opinion that, upon a consideration of the contract in the instant case and in view of the authorities above discussed, plaintiff would not be warranted in rejecting an order unless it acted reasonably in the matter. In this view it follows that the contract was not void for want of consideration. The court erred in sustaining the demurrer to the special counts.

The judgment of the superior court of Cook county is reversed and the cause remanded.

Reversed and remanded.

McSurely, J., concurs.

Mr. Presiding Justice Matchett dissents.


text:
    The People of the State of Illinois ex rel. H. T. Hollingshead et al., Appellees, v. American Discount Company et al., Appellants.
    Gen. No. 31,789.
    1. Corporations — director as necessary party defendant to stockholders’ petitions for examination of corporate books. In mandamus to compel a corporation and a director to permit stockholder to examine corporate books which had been largely removed from the State before service of the writ, held that the director was a proper party defendant, all of the books not having been removed.
    2. Corporations — propriety of order against director in stockholders’ proceeding to examine corporate books. In mandamus to compel a corporation and a director to permit stockholders to examine corporate books which had been largely removed from the State, an order to make the books available for examination and for other pertinent relief held not unwarranted as to the director, all of the books not having been removed.
    3. Mandamus — no denial of writ when not clear that no benefit will result. Where a writ of mandamus is justified under the evidence it will not be denied unless it is clear that no benefits' can possibly result from it.
    4. Corporations — when not clear that stockholders will derive no benefit from examination of books. Where, in mandamus to compel a corporation to permit stockholders to examine corporate books, it appears that proper demands of stockholders to examine books have been refused or evaded and that the books have largely been removed from the State, but some books have not been removed, held that the writ was properly awarded, it not being clear that the stockholders will derive .no benefit from it.
    Appeal by defendants from the Circuit Court of Cook county; the Hon. Oscar M. Torrison, Judge, presiding.
    Heard in the first division of this court for the first district at the March term, 1927.
    Affirmed.
    Opinion filed December 12, 1927.
    Rehearing denied December 27, 1927.
    Newman, Poppenhusen, Stern & Johnston, for appellants; Edward R. Johnston and Henry Jackson Darby, of counsel.
    Dent, Dobyns & Freeman, for appellees; Howard A. Will, of counsel.
   Mr. Justice O’Connor

delivered the opinion of the court.

By this appeal defendants seek to reverse an order of the circuit court of Cook county awarding a peremptory writ of mandamus.

On April 28, 1926, a petition on the relation of 17 stockholders of the American Discount Company, one of the defendants, was filed, the purpose of which was to compel the defendants to permit the relators to examine the corporate books of the company.

The record discloses that the American Discount Company was a corporation organized under the laws of the State of Delaware, and on April 7, 1919, was licensed to do business in this State; that there were. 5,000 shares of preferred and 5,000 shares of common stock of the company, of which the relators owned 216 shares of the preferred and 104 shares of the common. The summons was served on April 30, 1926. The record further shows that upon the American Discount Company being licensed to transact business in this State, it opened its principal office at No. 332 South Michigan avenue, Chicago, and began to transact business; that the defendant Harry C. Radon was president of the company and the defendant Myron W. Whittemore was a director and its designated agent, upon whom process might be served in this State. The defendants the American Discount Company and Myron W. Whittemore were served and filed their answer, and after the issues were made up the cause was submitted to the court without a jury and there was a finding in favor of plaintiff and an order entered awarding the writ, from which the American Discount Company and Whittemore prosecute this appeal.

The evidence tends to show that from-the time the defendant company was licensed to do business in this State, viz, April 7, 1919, it conducted its business in Chicago and at no other place; that for a short time after it commenced business in this State it paid some dividends but that the payment of dividends had stopped a considerable time before the petition was filed in the instant case; that for a number of months prior to the filing of the petition a number of stockholders made numerous efforts and demands to be permitted to examine the books and records of the company, but to no purpose, and they made complaint that no stockholders’ meeting had been held for a number of years. The evidence shows that no meeting of the stockholders had been held for a number of years. There is no explanation in the record as to why this was not done, nor is there any evidence in the record as to why dividends had not been paid; nor did the defendants offer any evidence as to why they did not permit the stockholders to examine the books as requested. The evidence shows that a number of stockholders at different times endeavored to see the president or officers of the company with a view of obtaining permission to examine the records of the company, but without avail.

The defendants offered evidence tending to show that on May 5, 1925, a resolution was passed by the board of directors of the American Discount Company to establish an office at New York City, and a further resolution of the board passed at a special meeting of the directors held in New York City on July 29, 1925, that “this company maintain an office in the City of New York” on West 57th street, and that another resolution was adopted by the board of directors on September 9, 1925, which approved and ratified the acts of the officers in establishing an office in New York City. . The evidence further tends to show that the defendant corporation was removing its property from its Chicago offices from the 27th of April, 1926, until the 30th of April, 1926, and that on May 6, 1926, it filed in the office of the secretary of State at Springfield, Illinois, an affidavit of withdrawal, as required by the law, surrendering its authority to do business in this State; that the affidavit was sworn to by Radon, the president, and Traub, the secretary of the defendant corporation. In it they swear that the defendant corporation discontinued business in Illinois on February 27, 1926, while the testimony of a witness, who was an employee of the defendant company, tends to show that business was continued up to and until May 1,1926, although not much business had been done for a short time prior to that date.

The defendant Whittemore testified that he was an attorney at law practicing in Chicago, with offices at No. 5 North LaSalle street; that he was a director of the defendant company and was designated by it as agent upon whom service might be had as required by the statute of this State; that he did not go to the defendant corporation’s offices in Chicago more than two or three times a year and that he at no time had possession of any of its books or records.

At the close of the evidence propositions of law and finding of facts were submitted to the trial judge, some of which were given and some refused. The court then entered the order appealed from, in which the issues were found in favor of the petitioner and against the defendants, and requiring the defendant corporation and Whittemore “to make available for examination and to bring into this state, if outside the state, and make available for examination by the petitioners or their agents the ledgers, journals, combination journals, cash books and other books of Account of said Co. its stock books, stock registers, stock transfer books and stock ledger, also the records showing the details of overhead charges, such as officers’ salaries, directors’ fees, salaries paid to the bookkeepers, auditors, etc., also all other books and records of the said American Discount Company, which may be necessary for a full and complete understanding of the affairs of the said American Discount Company, whether kept in the State of Illinois or in the office of the said American Discount Company at 250 West 57th street, in the City of New York or elsewhere,” and that the books be made available for examination by the relators at defendant Whittemore’s office, No. 5 North LaSalle street, and that it be conducted with reasonable dispatch and be completed within 60 days.

Section 38, chapter 32 of our statutes, Cahill’s St. ch. 32, ¶ 38, provides: “Each stockholder of a corporation shall have the right, at all reasonable times, by himself or by his attorney, to examine the records and books of account. Any officer or director who denies such access shall be liable to the stockholder denied in a penalty of ten per centum of the value of stock owned by such stockholder, in addition to any other compensation or remedy afforded him by law, if any, which shall be recoverable in any court of competent jurisdiction. * * *

“Nothing herein shall impair the power of the courts to compel by mandamus or judgment production for examination by any stockholder of the stock books of any corporation.”

And by section 84 of the Foreign Corporation Act, Cahill’s St. ch. 32, ¶ 84, of this State it is provided that a foreign corporation admitted to do business in this State shall enjoy the same rights and privileges and be subject to the same liabilities and restrictions as those of a domestic corporation.

The defendants contend that the order or judgment is erroneous as to Whittemore because it was not his duty to keep the books and records of the company, and that he never had any of them in his possession; moreover, that the books and records were in New York City and not within his power to bring to Chicago; further, that the corporate books and records were shipped from Chicago to New York before the summons was served upon him. We think the evidence in the record does not warrant the conclusion that the records of the company had all been sent to New York and before the date the summons was served on Whittemore, April 30, 1926, but are of the opinion that the court was warranted in finding that all of the books and records had not been taken out of Illinois at the time of the service of the writ on Whittemore. The court expressly refused to find as a fact that all of such records had been removed prior to May 1, 1926, as requested by the defendant. Whittemore was a director of the company, and under the facts in this case we are of the opinion that he was a proper party defendant and the order against him was not unwarranted. We are also of the opinion that the order appealed from was not erroneous as to the defendant corporation. It is clearly established by the evidence that repeated demands had been made by stockholders of the company to examine its books; that they had made complaints because there had been no stockholders’ meeting and no dividends paid; that repeated endeavors had been made by them and their counsel to take the matter up with the president or other officials of the company but that he evaded them and was keeping away from the office and refused to see them because he did not want them to look into the books. It is true, as stated by counsel for the defendant, that a peremptory mandamus is to a considerable degree a matter of discretion, and that it will not be awarded where compliance cannot be had. It is also the law that where a writ of mandamus is justified under the evidence it will not be denied unless it is clear that no benefit can possibly result from the issuance of it. 26 Cyc. 149; State v. Pan-American Co., 5 Pennewill (Del.) 391, 392, 61 Atl. 398. The awarding of the writ was clearly right under the evidence in this case, and it is not clear that the relators will derive no benefit from it.

The order and judgment of the circuit court of Cook county are affirmed.

Affirmed.

Matchett, P. J., and McSurely, J., concur.


text:
    Charles T. Whitney, Appellee, v. George E. Corbett Boiler & Tank Company, Appellant.
    Gen. No. 31,885.
    Attorney and client — admissions of attorney not binding on client. Evidence of admissions and statements of an attorney during a conversation in regard to„ an employee’s claim against his client that the client was liable and would pay the claim is inadmissible in the employee’s action against the client on the claim.
    Appeal by defendant from the Municipal Court of Chicago; the Hon. Charles F. McKinley, Judge, presiding.
    Heard in the first division of this court for the first district at the March term, 1927.
    Reversed and remanded.
    Opinion filed December 12, 1927.
    Sidney S. Pollack and W. G. Lesemann, for appellant.
    Frederick A. Brown, for appellee; Wm. G. Worthey, of counsel.
   Mr. Justice O’Connor

delivered the opinion of the court.

Plaintiff brought suit against the defendant to recover $1,113.57 which he claimed was due him for services performed for the defendant. There was a verdict and judgment in his favor for the amount of his claim, and the defendant appeals.

The undisputed evidence shows that plaintiff was employed by the defendant to render services for it, covering a considerable period of time; that from about November 20, 1922, until May 28, 1923, he performed services for the defendant in securing contracts, and plaintiff’s position is that during this period he was to be paid 3 per cent of the amount of the contracts obtained by him; that he was to draw $50 a week, which should be charged against his commission ; that this was the express agreement entered into between him and the defendant; that during this period he secured contracts for the defendant amounting to $83,952.64, and after deducting the payments he had received there was a balance due him of $1,113.57. On the other hand, the defendant’s position was that plaintiff was employed at a salary of $50 a week and that he had been paid this in full.

On the trial plaintiff offered evidence tending to sustain his contention, and evidence was offered on behalf of the defendant tending to sustain its contention.

Practically the only point in controversy was as to the term of plaintiff’s employment — whether he was to receive a commission or a weekly salary as above stated. Since we have reached the conclusion that there must be a re-trial of the case, we refrain from discussing the evidence, but it is sufficient to say that the evidence on the vital point in the case was in direct conflict. Plaintiff’s deposition was read on the trial and in it he testified, among other things, that in December, 1923, at the request of P. A. Corbett, the then president of the defendant company, he went to see W. G. Lesemann, the defendant’s attorney, at the latter’s office; that “I was sent there to make up a statement as to my best recollection trying to place the responsibility for their negligence in handling the St. Louis job”; that after conferring with Lesemann the statement concerning the St. Louis job was prepared and he was requested by Lesemann to sign it, which he refused to do unless the defendant would give him its note for the amount it owed him (being the amount claimed in the instant case); that Lesemann then stated in substance that if plaintiff brought suit against the defendant it would be thrown into bankruptcy; that Lesemann then said that plaintiff had a clear case against the defendant, but that he should wait a year and he would be paid; that plaintiff then stated he would wait the year and thereupon signed the statement concerning the St. Louis job. Plaintiff also called as a witness William Gr. Worthey, an attorney at law, employed by counsel for plaintiff. He testified that on May. 19,1925, he wrote the defendant advising it that plaintiff had placed in their hands for collection his claim amounting to $1,113.57, with instructions to bring suit unless the matter was adjusted at once; that a few days later he was called up by defendant’s president, P. A. Corbett, “and he told me to take this matter up with Mr. Lesemann”; that afterwards the witness went to Lesemann’s office and there was a discussion between himself and Lesemann, the substance of which was that Lesemann stated the defendant was financially involved, requested that plaintiff’s claim be not pressed and stated that “they would pay Whitney’s claim last.”

The defendant contends that the testimony given by Whitney and Worthey, above referred to, was improperly admitted over his objection; that the statements testified to as having been made by the defendant’s attorney, Lesemann, were inadmissible. We think this contention must be sustained. The admissions and statements testified to as made by the defendant’s counsel were mere matters of conversation and although they related to a fact in controversy they were not admissible in evidence against the defendant. Section 260, Vol. 1, Jones on Evidence; section 1063, 2 Wigmore on Evidence (2nd Ed.); section 186, Vol. 1, Greenleaf on Evidence (13th Ed.); McClintock v. Helberg, 168 Ill. 384; Schroeder v. Wolf, 227 Ill. 133; Saunders v. McCarthy, 8 Allen (Mass.) 42, 43; Pickert v. Hair, 146 Mass. 1; Loomis v. New York, N. H. & H. R. Co., 159 Mass. 39.

In Vol. 1 Jones on Evidence, the author says, section 260: “Statements of an attorney during a conversation held for the purpose of settling a controversy are not admissible.”

In Wigmore on Evidence the author says: “In the first place, an attorney is not a person whose admissions may be used against the party-client, except so far as concerns the management of the litigation; and this principle applies equally to the quasi-admissions here concerned and to the solemn admissions already discriminated. * * * The reason for this limitation is that the attorney’s admissions can affect his client so far only as he has authority to act as agent in his client’s place. * * * That authority, so far as it is to be implied from the mere general appointment as attorney, and has not been enlarged in the particular case, extends only to the management of the cause. ’ ’

In Greenleaf on Evidence, after adverting to admissions of attorneys of record as being binding upon their clients, the author says: “But other admissions which are mere matters of conversation with an at-= torney, though they relate to the facts in the controversy, cannot be received in evidence against his client.” (Sec. 186.) In the McClintock case our Supreme Court held that an attorney by reason of his employment as such had no authority to compromise a pending suit on behalf of his client; that this could not be done unless he had special authority. The court there said (p. 392): “He cannot bind his client by any act, which amounts to a surrender, in whole or in part, of any substantial right.” In the Schroeder case the Supreme Court of this State said (p. 136): “In McClintock v. Heiberg, 168 Ill. 384, this court held that an attorney has no power, without express authority, to bind his client by compromise of a pending suit or other matter entrusted to his care.”

In Saunders v. McCarthy, supra, it is said (p. 44) : “The defendant also offered to prove that, at one time when he met the plaintiff’s counsel for the purpose of settling the matter of the suit and of ascertaining the amount which the plaintiff had received, ’ ’ the counsel made certain admissions, but this evidence was rejected. In holding that this evidence was inadmissible the court said (p. 45): “The second question relates to the admissibility in evidence of certain admissions alleged to have been made by the plaintiff’s attorney. * * * The admissions in this case were mere matters of conversation and though they relate to the facts in controversy, they cannot be received in evidence against the plaintiff. The attorney was not the agent of his client to make such admissions. 1 Greenl. on Evidence, Sec. 186.” And to the same effect are the other two cases cited from Massachusetts.

In the instant case the testimony of plaintiff and of Worthey as to the admissions made by counsel for the defendant were mere matters of conversation, and although they related to a fact in controversy they cannot be received in evidence against plaintiff under the authorities cited, and we have found none to the contrary. We are therefore of the opinion that it was error to admit the testimony over defendant’s objection, and since the evidence on the vital point- in the case was in sharp conflict, we are unable to say that the ruling did not prejudicially affect the defendant.

But counsel for plaintiff say as to the testimony of Whitney, that “Objections to the testimony should have been made while taking the depositions.” This is all that is said on the subject and no authorities are cited. The record discloses that Whitney’s deposition was taken a considerable time prior to the trial of the case. But the objection urged by the defendant to the admissibility of this testimony went to its competency and this question can be raised on the trial. Illinois Cent. R. Co. v. Panebiango, 227 Ill. 170.

The judgment of the municipal court of Chicago is reversed and the cause remanded.

Reversed and remanded.

Matchett, P. J., and McSurely, J., concur.


author: Mr. Presiding Justice Barry

text:
    East St. Louis Lumber Company, Appellee, v. The United States Branch of The London Assurance Corporation, Appellant.
    1. Insurance — contract of insurance not running with property to benefit of purchaser. A contract of insurance is a personal contract with the insured which does not run with the insured property unless expressly so stipulated, and in the absence of an assignment of the policy with the insurer’s consent, the purchaser of the interest acquires no privity with the insurer.
    2. Insurance — transfer of property as not assignment of policy. A transfer of the insured property is not an assignment of the policy of insurance.
    3. Insurance — effect of assignment of policy with consent of insurer. An assignment of a policy of insurance consented to by the insurer effectuates a new contract with the assignee, on which the latter may sue in his own name.
    4. Insurance — necessary allegations by assignee of policy. If a plaintiff is not the party with whom the contract of insurance was made, but claims thereunder as assignee, he must make such allegations as to the assignment of the policy as will entitle him to bring the action.
    5. Insurance — essential averments of assignment of policy. Averments in a declaration in an action on an insurance policy as to the assignment of the policy by the person with whom the contract of insurance was • made to plaintiff with the knowledge and consent of the insurer are material and essential.
    6. Insurance — burden to prove assignment of policy. One suing on an insurance policy as assignee has the burden to prove the assignment.
    7. Insurance — general issue plea placing burden of proof on assignee of policy. The general issue plea by an insurance company puts the burden upon plaintiff, who sues as assignee, to prove material averments of the declaration in regard to the assignment of the policy and the consent of the insurer thereto.
    8. Insurance — insufficient showing of transfer of policy to plaintiff. Testimony of the former owner of property and to whom a policy of insurance thereon was issued and who conveyed the premises to plaintiff, that he did not know what was done with the insurance at the time he conveyed the premises and that he told the manager of the plaintiff that there was a policy on the premises, and testimony by the manager that he requested an officer of a corporate agent of the insurance company “to make out the papers and the deed, and to make out the papers and properly assign the insurance” to plaintiff, does not show that the insurance policy was sold, assigned or transferred to plaintiff.
    9. Insurance — effect of joining issue on special plea, that premises were transferred without proper consent of insurer. Where an insurance company files a special plea to the effect that prior to the destruction of the property by fire the premises were conveyed by the owner, who had the policy of insurance thereon, to plaintiff without the consent of defendant indorsed upon the policy and that by reason thereof the policy became void, plaintiff concedes the legal sufficiency of the plea as a defense by joinder of issue.
    10. Insurance — necessity of pleading waiver. In order to prove a waiver of a material provision of an insurance policy by the insurer it is necessary for plaintiff to plead the waiver.
    Appeal by defendant from the City Court of East St. Louis; the Hon. W. F. Borders, Judge, presiding.
    Heard in this court at the March term, 1927.
    Reversed.
    Opinion filed May 14, 1927.
    Maurice V. Joyce, for appellant.
    Beasley & Zulley, for appellee.
   Mr. Presiding Justice Barry

delivered the opinion of the court.

Appellant, on May 9, 1924, issued a fire insurance policy to George Barnes on a certain dwelling house in East St. Louis for a period of three years. At that time a mortgage clause was attached thereto in favor of Illinois Trust Company, trustee, as mortgagee. The policy contained provisions to the effect that the entire policy, unless otherwise provided by agreement indorsed therein or added thereto, should be void if the interest of the insured be other than unconditional and sole ownership; or if any change, other than by the death of the insured, takes place in the interest, title or possession of the subject of insurance; or if the policy be assigned before a loss.

On January 25, 1925, Mr. Barnes, the insured, sold and conveyed the insured premises to appellee and on May 24, 1925, the house was destroyed by fire. The law is well settled that a contract of insurance is a personal contract with the insured which does not run with the insured property unless expressly so stipulated and in the absence of an assignment of the policy with the insurer’s consent, the purchaser of the interest acquires no privity with the insurer. 26 C. J. 17, 18, 130; Lindley v. Orr, 83 Ill. App. 70. A transfer of the insured property is not an assignment of the policy of insurance. 26 C. J. 133; Newark Fire Ins. Co. v. Turk, 6 F. (2d) 533, 43 A. L. R. 496.

It is abundantly settled that on a sale and transfer of property covered by a policy of insurance, and an assignment of the policy to the purchaser, duly assented to by the company, a new and original contract of insurance arises between the insurance company and the assignee, which the latter may enforce without regard to what may have occurred prior to the assignment. The policy, it is said, in such a case expires with the transfer of the estate, so far as it relates to the original holder; but an assignment and assent of the company thereto constitute an independent contract with the purchaser and assignee, the same in effect as if the policy had been reissued to him upon the terms and conditions therein expressed. 14 R. C. L. 1007.

It is clear that an assignment of a policy of insurance consented to by the insurer effectuates a new contract with the assignee, on which the latter may sue in his own name. 14 R. C. L. 1429. If a plaintiff is not the party with whom the contract of insurance was made, but claims thereunder as assignee, he must make such allegations as to the assignment of the policy as will entitle him to bring the action. 26 C. J. 492; 14 R. C. L. 1434.

Where a plaintiff brought suit on a policy of insurance, payable to a third party who was the insured, and upon the back of which there was a purported indorsement to the plaintiff but the declaration contains no averments that the indorsement was made by the insurance company, or that insured had requested or consented to it, it was held that the declaration failed to show any right of action in the plaintiff. In order to give a right of action on a policy of insurance for a loss, to an assignee, the insurance company and the insured must act together in effecting an indorsement. Commercial Ins. Co. v. Treasury Bank, 61 Ill. 482.

To meet the requirements of the law appellee averred in its declaration, inter alia, that the said policy of insurance was issued to George Barnes as aforesaid and that he, on January 25, 1925, sold and conveyed the said premises to appellee for the consideration stipulated in the deed; that the said conveyance was negotiated at the office of Illinois State Trust Company, the agent of appellant named in the policy, and that said deed was duly prepared by the said agent of appellant and was then and there signed, sealed and delivered to appellee; that at the same time when the said conveyance was executed as aforesaid, the said George Barnes, for the same valuable consideration named in the said deed, sold, transferred and assigned his right, title and interest thereunder, which said policy of insurance was then and there in the possession of the said agent of appellant, Illinois State Trust Company, as mortgagee under a certain mortgage on the insured premises, to the sum of $4,500; that said assignment of the policy of insurance was made in the office of the said agent of appellant, and that, through its said agent, the defendant had actual knowledge of such assignment and expressly assented thereto; and that afterwards, with the knowledge of the conveyance and assignment aforesaid, appellant continued to retain the premium paid thereon and, in all respects, maintained the said insurance policy in full force and effect.

The averments as to the assignment of the insurance policy of George Barnes to appellee with the knowledge and consent of appellant were material and essential averments under the authorities above cited. Appellee sued as assignee of the policy and the burden was on it to prove the assignment. 26 C. J. 514. Appellant pleaded the general issue and two special pleas and by permission of the court afterwards filed an additional plea. The general issue put the burden upon appellee of proving the averments of its declaration in regard to the assignment of the policy and the consent of appellant thereto. The first special plea denied that the policy was sold, transferred and assigned to appellee by George Barnes with the knowledge and consent of appellant. This special plea really amounted to the general issue but appellee filed a replication denying the averments thereof.

George Barnes, who was the owner of the property and to whom the policy of insurance was issued, and who conveyed the premises to appellee, testified as follows: “I don’t know what was done with the insurance at the time I transferred the premises. I told Mike Reis there was a policy on there of $8,500.00.” Mike Reis was the manager of appellee and testified as follows: “I called up Baltz after Barnes had told me that he had a $6500.00 policy on this property and he made the deed to us for, and I asked Baltz to make out the papers and the deed, and to make out the papers and properly assign the insurance to the East St. Louis Lumber Company.” The Mr. Baltz referred to was at that time vice president of the Illinois State Trust Company, which company was conducting an insurance agency, and was acting as agent for appellant and other insurance companies.

We find no other evidence in the record bearing upon the question as to whether Mr. Barnes assigned the insurance policy to appellee. No witness testified to any fact or circumstance fairly tending to show that the insurance policy in question was considered or treated by Mr. Barnes or appellee as having been sold or transferred from Mr. Barnes to appellee. The transfer of the insured property was not an assignment of the insurance policy under the authorities above cited. The evidence above quoted does not fairly tend to prove that the policy of insurance was sold, assigned or transferred to appellee. The declaration avers, as above stated, that the deed of conveyance from Mr. Barnes to appellee, as well as the assignment and transfer of the policy of insurance, was made in the office of appellant’s agent. The evidence is to the contrary. Mr. J. C. Fisher was in the employ of appellee at the time the deed was executed. He testified that he drew the deed at the office of appellee and that no one from the Illinois State Trust Company was present when the deed was executed.

The second special plea was to the effect that prior to the destruction of the property by fire the premises were conveyed by George Barnes to appellee without the consent of appellant indorsed upon the policy of insurance and that by reason thereof the said policy became void. Appellee joined issue on the averments thereof, thereby conceding the legal sufficiency of the plea as a defense. Chicago Great Western Ry. Co. v. People ex rel. Bennett, 179 Ill. 441, 446; Raymer v. Modern Brotherhood of America, 157 Ill. App. 510. Appellee’s replication to said plea simply denied the averments thereof and did not plead a waiver. The plea was clearly proved beyond question as no one contends that the consent of appellant to the transfer was indorsed upon the policy. Appellee contends that it proved a waiver. To be availed of a waiver must be pleaded. Feder v. Midland Casualty Co., 316 Ill. 552. But even if appellee had replied by averring a waiver, there is no competent evidence to that effect. After Mr. Reis had testified to having talked with Mr. Baltz as above quoted, he was allowed to state, over objection, that when he told Mr. Baltz that, he agreed to it. Counsel for appellant objected on the ground that the witness was stating a conclusion but the'Objection was overruled.

Other questions were raised by the respective parties and urged upon our attention, but as appellee failed to prove vitally essential averments of its declaration it is unnecessary to consider those questions. The judgment is reversed at the costs of appellee.

Reversed.

The clerk will incorporate in the judgment the following: “The court finds that appellee offered no evidence fairly tending to prove that the policy of insurance sued on was sold or assigned by George Barnes to appellee; that the insured premises were sold by George Barnes to appellee before the building in question was destroyed by fire."


author: Mr. Justice Higbee

text:
    Indian Refining Company, Appellee, v. Andrew Mellon, Agent for United States, Appellant.
    1. Carriers — Federal agent not to waive provision of hill of lading limiting time to sue. The agent for the United States under the Transportation Act of 1920 cannot waive a provision of a bill of lading limiting the time within which suit should be brought for the loss of the contents of a car.
    2. Carriers — evidence not showing waiver of provision of hill of lading limiting time to sue. Correspondence by a railroad definitely denying liability of a claim for loss until after the expiration of the time to sue fixed in the bill of lading, and which correspondence stated nothing tending to mislead the shipper or to cause it to expect any payment of the claim, followed by an offer of settlement by the railroad after the expiration of the time to sue, does not show a waiver of the provision of the bill of lading limiting the time to sue.
    Appeal by defendant from the Circuit Court of Lawrence county; the Hon. J. C. Kern, Judge, presiding.
    Heard in this court at the March term, 1927.
    Reversed.
    Opinion filed June 14, 1927.

      P. J. Kolb, for appellant.
    McGaughey, Tohill & McGaughey, for appellee.
   Mr. Justice Higbee

delivered the opinion of the court.

This is an appeal from, a judgment in the circuit court of Lawrence county in favor of the Indian Refining Company, appellee, in the sum of $919.22 against Andrew Mellon, agent for the United States under the Transportation Act of 1920, appellant. The suit was brought for the loss of the contents of a tank car of kerosene delivered on May 15, 1919, to the United States Railroad Administration on the Cleveland, Cincinnati, Chicago & St. Louis Railway Company, then under Federal control, at Lawrenceville, Illinois, to be transported to Huntington, Indiana, and there to be delivered to appellee as consignee. The shipment was totally lost in transit. Upon the trial a jury was waived and it was stipulated that a reasonable time for the transportation and delivery of the car at its destination would have elapsed on May 30, 1919. The bill of lading which was made a part of the stipulation provided that suits for loss, damage or delay in case of failure to make delivery should be instituted only within two years and one day after a reasonable time for delivery had elapsed. This suit was instituted on September 20, 1921, against James C. Davis, director general of railroads, and the Cleveland, Cincinnati, Chicago & St. Louis Railway Company, but was dismissed on October 5, 1923, as to the railway company. On January 3, 1924, an alias sum: mons was issued against James C. Davis, agent of the President of the United States of America, which was served upon the railway agent at Lawrenceville, an amended declaration was filed February 28,1924, naming James 0- Davis agent for the President of the United States as party. It was stipulated that James C. Davis was agent of the President of the United States under the Federal Transportation Act of 1920. That act provided that any suits based on causes of action arising out of the possession, use or operation by the President of any railroad under the provisions of the Federal Control Act should be brought not later than two years from the date of the passage of the Transportation Act of 1920. Upon being made party defendant, James C. Davis, agent for the President, moved to dismiss the cause on the ground that suit was not brought against him as such agent within the period of limitations prescribed by this act. The motion was denied and the same question was raised by a demurrer which was overruled. The question was again presented by a plea in bar but before this plea was decided Andrew Mellon was named by the President as agent for the United States under the Transportation Act of 1920.. On motion of appellee made on October 4, 1926, Mellon as such agent was substituted as defendant and an amended declaration filed against him- He then moved to strike the amended declaration from the files and to dismiss the suit on the ground that the cause of action arose out of the possession, use and operation by the President of the railroad mentioned in the declaration under the Federal Control Act, and was of such a character as prior to that act the suit could have been brought against the railway company, and after the termination of the Federal Control Act could have been brought against the agent designated by the President for that purpose, but that it was not brought against such agent or any of his predecessors within two years from the passage of the Transportation Act of 1920 as required by the provisions of that act. This motion was overruled as well as the demurrer filed by appellant, and upon trial judgment was entered for appellee for the full amount claimed.

Appellant relies upon the defenses: (1) that this suit was brought against James C. Davis, director general of railroads, and was not brought against the agent for the United States under the Transportation Act of 1920 within two years from the passage of that act as is required by subdivision A of section 206 and that appellant as such agent was improperly substituted as defendant; (2) that this suit was not brought within two years and one day after a reasonable time for the delivery of the shipment in question had elapsed as required by the provisions of the bill of lading.

In the view we have taken of this case it is not necessary to consider the first defense relied upon by appellant, as in our opinion the disposition of the second ground of defense disposes of the entire case.

It is not denied that the provision of the bill of lading herein involved is a valid one. Appellee, however, contends that this provision of the bill of lading was waived by appellant. On the other hand appellant claims not only that such provision was not waived but that appellant had no authority to waive the same. It was stipulated as above stated that a reasonable time for the transportation and the delivery of the shipment at its destination would have elapsed on May 30, 1919. This suit was instituted September 20, 1921, more than two years and one day after the shipment should have been delivered.

In our opinion the provision limiting the time •within which this suit should have been brought as fixed by the bill of lading could not be waived by appellant. This is in accord with the holding of the United States Supreme Court in Georgia F. & A. Ry. Co. v. Bliss Milling Co., 241 U. S. 190, and Phillips Co. v. Grand Trunk Western R. Co., 236 U. S. 662. However, even though appellant could have legally waived this provision it is our opinion that in no event do the facts relied upon by appellee constitute such a waiver.

It appears that the claim for this loss was filed July 1, 1919. In reply to that claim J. K. Vance, freight claim agent of the Cleveland, Cincinnati, Chicago & St. Louis Railway Company, advised appellee that investigation disclosed the carrier was not liable for the claim and that the claim could not be given further consideration. September 17, 1919, appellee’s traffic manager asked that the matter be given further consideration. On September 30, Vance again replied that the loss was not due to the negligence of the carrier and asked cancellation of the claim. On October 4, appellee’s traffic manager asked that all papers which had been forwarded in support of the claim be returned which was done October 9, 1919. It appears that afterwards, in reply to a letter from appellee’s traffic manager, Vance again advised that further investigation failed to show any liability on the part of the carriers. On July 16, .1920, Gordon, Weed and Young, attorneys for appellee, wrote Vance that the claim had been referred to them with authority to start action at once; that while the files showed the claim had already been rejected, yet before commencing suit they wished to give him an opportunity to reconsider his disposition of the claim, with the view of making an adjustment without litigation. On July 29, Vance in reply to this letter, stated that the matter was being taken up with the legal department and he presumed they would in turn take it up with the United States Railroad Administration to see if it was desired to defend the suit and he would advise later. On September 24, 1920, Vance advised these attorneys that the matter had again been placed before' the legal department and from the evidence in their-possession they could not admit any liability for the loss and calling attention to the fact that all papers in the matter had been returned to appellee October 9, 1919. It further appears that under date of March 7, 1921, one 0. A. Porter, in behalf of appellee, wrote to E. V. Zehring, general agent of the Cleveland, Cincinnati, Chicago & St. Louis Railway Company, following a conversation between these gentlemen, concerning the contemplated suit, giving certain claimed facts concerning the shipment, and expressing regret that the action of Mr. Vance made the bringing of suit necessary, and further saying: “In view, however, of your intimating the desirability of having Mr. Townsend review this case, we have asked our attorneys to hold the matter in abeyance, and will therefore appreciate you advising us as promptly as possible what action is contemplated.” Some further correspondence passed between those two parties, concerning appellee’s claim between the date of this first letter and July 25,1921. Under date of August 5,1921, an offer to settle for 50% of the claim was made by J. K. Vance, the freight claim agent, and on August 9, appellee’s attorney replied that this offer could not be accepted and that unless payment in full was made on or before September 1, 1921, suit would be brought. On August 9, 1921, attorneys for appéllee wrote to Evan Shelby, regional counsel for the United States Railway Administration, giving a rather detailed statement of what had taken place in the way of negotiations for the settlement of this claim. They insisted in their letter appellee was entitled to the full amount of its claim for loss and asked that the decision to reject the claim be reconsidered. In reply to, this letter the regional counsel wrote he had reached the conclusion that there was no liability on the claim and that 50% settlement had only been suggested on the theory that a small amount might properly be paid rather than assume the risk and expenses of litigation and stating that since the proposition had not been accepted, it was withdrawn and the claim declined and stating that in case of suit the administration would expect the carrier to use all defenses available. This suit then resulted. It would seem from this correspondence that the railroad administration had definitely and persistently denied all liability for the claim up to and until after June 1, 1921, which would be more than two years and one day after the time the delivery could reasonably have been made, and there was nothing said in the correspondence on the part of the railroad administration prior to that time tending to mislead appellee or to cause it to expect any payment of the claim. The proposition for á settlement was made after the period of two years and one day had elapsed.

Therefore, even if we assume that appellant had the power to waive this defense, in our opinion appellee was not led to believe by the United States Railroad Administration that the benefit of this provision of the- bill of lading was not being relied upon or that any settlement of the claim would be made within the time limited for the suit to be brought. After that time had elapsed any attempted negotiations could no longer furnish an excuse for not bringing suit. This has been the holding of the Appellate Courts of this State in similar cases. (Metropolitan Accident Ass’n v. Clifton, 63 Ill. App. 152; Phoenix Ins. Co. of Brooklyn v. Lebcher, 20 Ill. App. 450; and Pennsylvania Co. v. Piowaty, 207 Ill. App. 176.) In our opinion therefore the matters relied upon by appellee for a waiver of this provision of the bill of lading were not sufficient to accomplish that end and as the suit was not brought within the time limited thereby, appellee has lost its right of action and the claim itself is barred. Under these circumstances, it would be useless to remand the cause for another trial and the judgment is therefore reversed.

Reversed.