author: Mr. Presiding Justice MoSurely

text:
    Diana Shapiro and Martin Maseik, Appellees, v. Amalgamated Trust and Savings Bank, Appellant.
    Gen. No. 38,511.

      Opinion filed December 31, 1935.
    Fisher, Boyden, Bell, Boyd & Marshall, of Chicago, for appellant; Budolph M. Mulfinger, of Chicago, of counsel.
    Abraham Kosdon and William C. Wines, both of Chicago, for appellees; Green & Costigan and Walter C. Bowman, all of Chicago, of counsel.
   Mr. Presiding Justice MoSurely

delivered the opinion of the court.

Plaintiffs brought suit alleging that defendant failed to follow instructions of plaintiffs with reference to procuring a fire insurance policy and by reason of this failure plaintiffs were unable to collect the insurance when fire nearly destroyed the premises. Upon trial plaintiffs had a verdict for $1,783.75; defendant appeals from the judgment on the verdict.

Plaintiff Diana Shapiro is of foreign birth; she had done business with defendant bank for many years; she had received a letter with reference to an insurance policy on some farm buildings in New York and called upon defendant bank to have the letter explained to her; she was referred to a young lady employed in the bank who told her the letter was a notice that within five days after its date the insurance policy would be canceled; Miss Shapiro asked what she should do and was told that defendant would secure a policy for her; Miss Shapiro gave information as to the value of the property and it was suggested to her that she take out a policy for $3,000; she was then told to bring in her deed to the property; some time later she went to the bank, gave the deed to the young lady and at the same time informed her that a “partner” occupied the premises and that there was also a mortgage and another insurance policy on the premises; she was told that defendant knew how to make out a policy from the deed; the deed was left with the defendant’s employee and plaintiff paid defendant the insurance premium; the latter part of March or the first of April the policy was delivered by the defendant to Miss Shapiro; shortly thereafter there was a fire upon the premises and plaintiffs made proofs of loss to the Merchants and Manufacturers Fire Insurance Company, which issued the policy, but these were returned to her by the insurance company with a denial of liability.

The deed which Miss Shapiro left with defendant for the purpose of giving it the data necessary for the policy ran to Martin Maseik and Diana Shapiro, the plaintiffs; it conveyed by metes and bounds 125 acres of land, more or less, in Ulster County, New York; the policy of the Merchants and Manufacturers Fire Insurance Company which defendant secured for plaintiffs and delivered to Miss Shapiro named Diana Shapiro alone as the insured and contained also a provision that the entire policy should be void “if the interest of the insured be other than unconditional and sole ownership.”

The documents evidencing proofs of loss and the letter of the insurance company denying liability, although apparently introduced in evidence and considered by the jury, have, according to a stipulation, been lost in the office of the superior court clerk. It is therefore a fair presumption that the insurance company based its denial of liability upon the showing in the proofs of loss that Martin Maseik also had an interest in the property and therefore under the condition in the policy as to sole ownership the policy was void. The jury could properly find that defendant failed to follow the instructions given it by Diana Shapiro to procure a valid policy of fire insurance upon the premises.

Defendant argues that Miss Shapiro was under a duty to examine the policy issued to her within a reasonable time and that she will be presumed to know the condition in the policy voiding the same if her ownership was not sole and unconditional. Brant v. Gallup, 111 Ill. 487, is cited in support of the general proposition that the insured is under a duty to examine a policy in order to inform himself of its terms. The decisive point in that case was that the insured knew that his agents had taken out insurance for a less amount than he had ordered, and by his conduct had ratified this action. Cases involving the liability of an insurance company which directly issues a policy to the insured are not in point. This is a case where plaintiffs are asking damages from their agent who failed to follow their.instructions. The facts are very similar to those involved in Reed Mfg. Co. v. Wurts, 187 Ill. App. 378. In that case plaintiffs instructed the defendant to secure certain fire insurance; defendant failed to follow instructions, with an ensuing loss to plaintiffs who sued defendant to recover damages. The court said:

“The principles of law generally applicable to actions of the character here involved are not seriously controverted by the defendant.

“If an agent neglects to procure insurance or does not follow instructions when obligated so to do, or if the policy obtained is void or materially defective through the agent’s fault, or if the principal suffers damage by reason of any mistake or act of omission or commission of the agent which constitutes a breach of duty to his principal, he is liable to his principal for any loss he may have sustained thereby. 1 Joyce on Insurance, sec. 678; Kerr on Insurance, sec. 120; 1 Cooley’s Briefs on the Law of Insurance, p. 338.”

In Israelson v. Williams, 151 N. Y. S. 679, the difference between the rule applicable in an action between the insured and an insurer and an action brought by an insured against his own agent is stated. To the same effect is Harris v. A. P. Nichols Inv. Co. (Mo. App.), 25 S. W. (2d) 484. In the instant case the defendant was the agent of the plaintiffs in procuring the insurance policy and it cannot avoid liability because of an alleged failure on the part of plaintiffs to ascertain whether the agent has faithfully performed the duty for which it was employed.

Defendant further contends that there was a failure of proof that plaintiffs had a joint interest in the premises in question, which avoided the policy. Plaintiff Diana Shapiro testified that she and Martin Maseik supplied the purchase price of the property; she also told in some detail as to the joint purchase by herself and Maseik of plumbing, glass, shingles and other lumber that went into the houses, which consisted of a 10-room frame house and two bungalows; she also testified that Maseik was in possession of the premises; there was also introduced in evidence the deed conveying the premises to the plaintiffs, jointly. When it was sought to introduce the deed in evidence the defendant objected because the proof did not follow sec. 20, ch. 30, Conveyance Act, Ill. State Bar Stats. 1935, which provides that where acknowledgment is made before a notary public, where the lands are without the State of Illinois, the acknowledgment must be certified under his seal of office, and the deed offered, while purporting to be acknowledged before a notary public, does not show a notarial seal. It should be borne in mind that it was not necessary to prove precisely what interest either of the respective plaintiffs had in the premises. It was necessary only to show that the ownership of Diana Shapiro was not “unconditional and sole.” The evidence that plaintiffs jointly purchased the property and paid for the improvements and repairs and were jointly in possession under a claim of ownership is prima facie evidence of joint ownership. Glos v. Ault, 221 Ill. 562; Hewes v. Glos, 170 Ill. 436. In Wigmore on Evidence (2d ed.), sec. 2515, the author says that the fact of possession alone may serve to create a presumption of title. The evidence of the joint purchase of the premises and the joint purchase of materials for construction and repairs, and the joint possession, raises a sufficient presumption that Diana Shapiro did not have “unconditional and sole ownership.”

Objection is made to an instruction given at the request of plaintiffs which contains the objectionable words that any preponderance of evidence, “however slight,” sustains the burden of proof imposed upon plaintiff. The use of the words “however slight” has been repeatedly criticized, and in a close case might require a reversal. In the instant case, however, there is no substantial controversy as to the facts, hence the questioned instruction is not of sufficient importance to demand a reversal.

Something is said in the argument as to the value of the premises, and there was some evidence as to this. The point is not made in defendant’s points. There was evidence that the purchase price and amounts expended for improvements was between $5,000 and $6,000; there was evidence of another policy of insurance on the premises on which the mortgagee received ■ $2,716.25. The present policy is for $3,300. The verdict of $1,783.75 is well within the range of the testimony.

We see no sufficient reason to reverse, and the judgment is therefore affirmed.

Affirmed.

Hatchett and O’Connor, JJ., concur.


source: Caselaw Access Project

author: Mr. Presiding Justice McSurely

license: Public Domain

text:
    Magdalena Hagen, Appellant, v. George Bailus et al., Appellees.
    Gen. No. 38,542.
    Opinion filed December 31, 1935.
    John E. Wall, of Chicago, for appellant; Lloyd C. Whitman, of Chicago, of counsel.
    Anson H. Brown and Taylor, Miller, Busch & Boyden, for certain appellees; Anson H. Brown, Orville J. Taylor, John S. Miller and David S. Sampsell, all of Chicago, of counsel.
   Mr. Presiding Justice McSurely

delivered the opinion of the court.

Plaintiff while riding as a passenger in an automobile owned and driven by defendant Fred Geek, was injured through a collision with another automobile at a road intersection; she brought suit, against Geek and George and Clarence Bailus, the owner and driver, respectively, of the other automobile. Upon trial the court instructed the jury to find George and Clarence Bailus not guilty, and from the judgment on the verdict to this effect plaintiff appeals.

The trial court was of the opinion that the evidence failed to show that plaintiff, a guest, exercised due care, hence she was guilty of negligence contributing to the accident and could not recover.

The accident happened at two o’clock p. m. on a bright afternoon, January 22, 1933; the Geek automobile with the plaintiff was proceeding westward along the Warrenville road; at the same time the Bailus car was going northerly on route 59, approaching the intersection with the Warrenville road; plaintiff was 55 years old; she was sitting in the back seat on the left side, her husband next to her, and her brother, Mr. Baier, was sitting on the right side of the rear seat; it was a closed car. Plaintiff testified .she did not know how to drive an automobile and, as" she sat in the car, could not judge of the approximate speed it was going; she said that the first she knew of the accident was when she felt the shock of the collision.

Defendant Geek testified that as he approached the intersection of Warrenville road and route 59 he was going westward at about 25 to 30 miles an hour; that there were no buildings on the corner except a farmhouse on the north side of Warrenville road about 200 or 300 feet east of route 59; that he saw the Bailus car on route 59 when it was 300 to 400 feet to the south of the intersection; that he stopped his automobile at a stop sign which is about 10 or 15 feet from the edge of the concrete roadway on route 59; that he started up his car and went into second speed to get out of the way of the Bailus car but the Bailus car struck his car in the side near the hind end.

We thus have a situation where the driver of the car in which plaintiff was riding saw the other car and, in his judgment, had sufficient time to cross route 59 before the Bailus car came on the intersection. It is well settled that even where a plaintiff may be guilty of negligence he will not, for this reason alone, be prevented from recovering in an action for injuries unless it is also shown that such negligence contributed to the accident. Lerette v. Director General of Railroads, 306 Ill. 348; Jeneary v. Chicago & Interurban Traction Co., 306 Ill. 392; Pienta v. Chicago City Ry. Co., 284 Ill. 246; Pollard v. Broadway Cent. Hotel Corp., 353 Ill. 312.

Moreover, a passenger in an automobile need not warn the driver of the approach of other automobiles which the driver sees. In Hoffman v. Yellow Cab Co., 238 Ill. App. 269, the passenger failed to warn the driver of the approach of the other automobile. It was held it must be presumed the driver saw the approaching automobile, but even if the driver did not, it was a question of fact to be determined by the jury whether plaintiff was guilty of contributory negligence, and quoted with approval Hedges v. Mitchell, 69 Colo. 285, where it was said, “The rear seat driver is responsible for enough accidents as the score stands without the aid of judicial precedent. ’ ’

In Schultz v. Live Stock Nat. Bank of Chicago, 278 Ill. App. 623 (Abst.), we said if the driver sees an approaching automobile, and is watching it, it is not necessary for a guest to call the driver’s attention to it. In Berry on Automobiles (7th ed.), vol. 5, commencing on page 255, the author has collated a large number of eases supporting the proposition that a passenger is not negligent in failing to warn the driver of a danger if the driver is already aware of it. In Hermann v. Rhode Island Co., 36 R. I. 447, the rule is stated that:

“It cannot be said as a matter of law that such guest or passenger is guilty of negligence because he has done nothing. In many such cases the highest degree of caution may consist of inaction. In situations of great and sudden peril meddlesome interference with those having control, either by physical act or by disturbing suggestions and needless warnings may be exceedingly disastrous in its result. While it is . . . the duty of such guest or passenger not to submit himself and his safety solely to the prudence of the driver of the vehicle, and that he must himself use reasonable care for his own safety, nevertheless he should not in every case be held guilty of contributory negligence merely because he has done nothing. If there be threatened danger which is known to the passenger and unobserved by the driver the passenger would be guilty of negligence if he failed to notify and warn the driver. ... ”

Cases cited by the defendants, upon which the trial court seemed to have relied in directing a verdict for defendants, can be readily distinguished from the instant circumstances. Opp v. Pryor, 294 Ill. 538, involved a collision between an automobile and a freight train; the plaintiff, a passenger in the automobile, testified she did nothing in connection with the driving; the driver of the automobile testified that she looked and did,not see the freight train although she was familiar with the crossing. In St. Clair Nat. Bank of Belleville v. Monaghan, 256 Ill. App. 471, it was pointed out that in the Opp case the passenger had an equal opportunity with the driver to observe danger in crossing’ a railroad track and should have warned the driver. But the opinion also said that a passenger in an automobile approaching a street intersection involves a situation not analogous to the class of cases which requires the passenger to be on the lookout for approaching trains at a known dangerous point, and it was held that whether a passenger in an automobile was bound to warn the driver of a street intersection presented a question of fact to be submitted to a jury. McDermott v. McKeown Transp. Co., 263 Ill. App. 325, presented the situation of an automobile running in a dense mist or fog at night with the headlights showing only about 8 or 10 feet ahead. It was held that these conditions were so dangerous that plaintiff should have warned the driver he was driving too fast under the circumstances. In Dee v. City of Peru, 343 Ill. 36, cited by defendants, the automobile in which Dee was riding as a guest ran into an open draw bridge into a river; Dee, the passenger, was drowned; upon trial there was no evidence as to his conduct, the driver testified he did not see that the bridge was open or that the barrier gate was shut or ■ the bridge tender waving them to stop. The court found there was no evidence that the deceased, Dee, called the driver’s attention to the danger confronting them; that the accident happened in broad daylight, and that the failure of any evidence that deceased did anything to prevent the accident barred a recovery.

In these cases the driver of the automobile failed to notice the danger. That is not the situation in the present case. Here the driver, Geek, saw the Bailus automobile approaching on the other road and governed himself accordingly in the management of his automobile. Nothing that, plaintiff could have said or done would have given the driver greater knowledge of the circumstances than he already had.

In the light of the decisions above referred to it cannot be said, as a matter of law, that plaintiff was guilty of contributory negligence, and we hold that the trial court was in error in this respect.

Respective counsel have argued at too great length matters which are not pertinent to the single question presented, namely, was plaintiff guilty of contributory negligence as a matter of law? We are deciding this question in the negative, and for this reason the judgment is reversed and the cause remanded.

Reversed and remanded.

Hatchett and O’Connor, JJ., concur.


author: Hr. Justice O’Connor

text:
    Rose Donohue, Appellee, v. Central Life Insurance Company of Illinois, Appellant.
    Gen. No. 38,435.
    Opinion filed December 31, 1935.
    Hyman A. Pierce, of Chicago, for appellant; Harold Kruley, of Chicago, of counsel.
    Harold O. Hulks and Charles R. Barrett, both of Chicago, for appellee.
   Hr. Justice O’Connor

delivered the opinion of the court.

Plaintiff brought suit against the Central Life Insurance Company of Illinois, a corporation, and Arthur H. Conley, to recover the rental value of property located in Oak Park for the period from May 1, 1933, to September 1,1934, or a total of $1,200. The case was tried before the court without a jury. The suit was dismissed as to Conley. There was a finding and judgment in plaintiff’s favor and against the Central Life Insurance Company for $1,040 and it appeals.

The record discloses that January 24, 1926, Harold Cusack and his wife gave a trust deed on the property in question to secure an indebtedness of $10,000. Afterward the property was conveyed by the mortgagors to plaintiff, Bose Donohue, the mother of Harold Cusack. The notes and trust deed were owned by defendant, Central Life Insurance Company of Illinois, and on April 16, 1931, it filed a bill of foreclosure in the superior court of Cook county; on April 30, 1931, HerbertNewcomb was appointed receiver to collect the rents, manage and control the property. His bond was fixed at $1,000. April 2, 1932, Newcomb filed his bond and it was approved by the superior court. Prior to that time, February 19, 1932, a decree of foreclosure was entered. The decree provided among other things, “That the complainant, Central Life Insurance Company be and is hereby given a lien upon the rents, issues, and profits arising from said premises during the full fifteen month statutory period of redemption as provided by law. . . . And that Herbert Newcomb heretofore appointed Receiver in this case upon qualifying as such shall act as Receiver of this court during said period of redemption or until said Receiver shall have collected sufficient money to satisfy” any deficiency, and that the net rents collected by him he applied from time to time in payment of the deficiency. March 16,1932, the master sold the property under the decree, the sale was approved by the superior court March 21, 1932, and a deficiency decree entered for $912.11. The deficiency decree provides that “Herbert Newcomb, upon qualifying as such, shall act as Receiver of this Court for the full fifteen month statutory redemption period and with power to rent said premises . . . and to collect rents and to keep in repair said premises and to apply the rents from time to time upon payment of said deficiency and to pay the expenses of management and maintenance of said premises in order to keep the premises in a fit condition for renting,” and that all persons in possession of the premises “are hereby ordered to pay rents to the said Receiver ’ ’; and that the receiver report to the superior court his acts and doings. After the period of redemption had expired a master’s deed was issued to defendant Central Life Insurance Co., it being the owner of the master’s certificate of sale. The deed is dated June 17,1933, and acknowledged October 16, 1934, the latter date apparently being the day on which the deed was executed. August 2, 1932, an order was entered by the superior court of Cook county awarding a writ of assistance against Harold Cusack that he deliver up forthwith possession of the premises to the receiver. May 1,1933, Dr. Arthur Conley took possession of the premises and paid $75 a month as rent to defendant, Central Life Insurance Company. This $75 was for rent of the premises and the use of carpets on the floor, a refrigerator, a gas range, an oil burner and other personal property which the defendant Central Life Insurance Co. had purchased from plaintiff after the foreclosure and sale of the premises. All the foregoing facts are stipulated and the evidence further shows that defendant, Central Life Insurance Co., expended $1,328.57 in repairing the premises, the repairs being necessary to render the premises tenantable.

The evidence further shows that Newcomb, the receiver, did nothing except to have his bond approved and to procure the writ of assistance, as above stated. He collected no rents, made no report and seems to have disappeared.

Plaintiff, called by defendant, testified that she had lived in the premises about three months and vacated about September or November, 1932, moving into her own property a short distance from the property in question, and she knew that Dr. Conley moved into the premises about May 1,1933.

The court held that plaintiff was entitled to the rents until the master’s deed was issued, • October 16, 1934, since the receiver did not physically take possession of the premises and collect the rents. In support of the trial judge’s ruling, counsel for plaintiff cite Allison v. White, 285 Ill. 311. That was a bill for partition of 320' acres of land. The land was in possession of defendant, White, who under an apparent chain of title had executed a mortgage on the property. The bill prayed, in addition to the partition, the cancellation of the mortgage. A decree was entered as prayed for. The court there said (p. 321): “It is argued that Isabelle Allison could convey nothing by her deed but her right of redemption, which had already expired. Until the execution of the master’s deed she was still the owner of the life estate, subject to the incumbrance of the sale. She was entitled to the possession and control of the property. The certificate of sale conferred no title to the land. It was only evidence of a right to obtain the title, and as against every right except that right, and until it was exercised and a deed made, Isabelle Allison was the owner of the life estate. By failing to redeem from the master’s sale she did not lose her title, and if the master’s deed was not executed within the time limited by the statute she was then the absolute owner of the life estate. Lightcap v. Bradley, 186 Ill. 510.” We think the rule of law announced in that case does not affect the rights of the parties in the instant case where the foreclosure decree and the deficiency decree expressly provided that the receiver, upon qualifying, should take possession of the property during the period of redemption, manage, control, collect the rents, keep the building in repair and apply the rents toward the satisfaction of the deficiency judgment of $912.11. The receiver qualified by having his bond approved. He obtained a writ of assistance directed against Harold Cusack, commanding that he deliver up the premises to the receiver and apparently the writ was executed. Afterward, in September or November, 1932, plaintiff moved out of the premises and apparently the property was vacant from that time until it was rented to Dr. Conley May 1, 1933, by defendant Central Life Insurance Co. It is undisputed that the premises were in a bad state of repair; the roof leaked and the insurance company expended $1,328.57 to render the building tenantable. The insurance company also purchased some of the furnishings of the house from plaintiff and Dr. Conley paid rent for the premises which included the use of the personal property so purchased, to the insurance company. Plaintiff after vacating the premises moved to her own home," a short distance from the property, as she testified, and she knew that Dr. Conley was occupying the premises from May 1, 1933. She made no complaint nor any claim that she had any interest in the property until she brought suit on October 11, 1934, six days before the master issued his deed. It is obvious that plaintiff’s claim is an afterthought, and the fact that the receiver did not actually take possession of the property and that the insurance company neglected to take out a deed for more than a year after it was entitled to one, although it was collecting rents in the meantime, were merely irregularities. It is apparent that plaintiff consented to what the insurance company had done in improving and renting the premises and cannot now be heard to complain. State Bank & Trust Co. v. Massion, 279 Ill. App. 234. In that case we held that a mortgagor who consents to be appointed to operate the mortgaged property in lieu of the appointment of a receiver, virtually admits the necessity for the receiver and will not be heard to complain that a receiver was not actually appointed.

We are unable to agree with the contention of counsel for plaintiff that “Upon the entry of a decree of foreclosure followed by a sale, the mortgage or trust deed is merged in and cancelled by the decree, and ceases to exist longer as a legal instrument. It no longer binds the parties, and cannot be resorted to by either as a basis for a claim against the other.” This contention is contrary to the holding of this court in Bolton v. Starr, 223 Ill. App. 39, and cases there cited, and is inapt here because of the provision contained in the deficiency decree above quoted.

Before entering judgment of reversal we might suggest that if the $1,328.57 expended by the defendant insurance company (but evidence tending to prove this fact having been excluded) was unnecessary and improper, the matter can be gone into by the chancellor in the foreclosure proceeding.

The judgment of the municipal court of Chicago is reversed.

Judgment reversed.

McSurely, P. J., and Hatchett, J., concur.


author: Mr. Justice O’Connor

text:
    Charles H. Albers, as Receiver for the Cody Trust Company, Appellant, v. Indemnity Insurance Company of North America, Appellee.
    Gen. No. 38,451.
    Opinion filed December 31, 1935.
    George A. Novak, of Chicago, for appellant; Donald ' P. Vail and Louis H. Kohn, Jr., both of Chicago, of counsel.
    Dent, Wbichelt & Hampton, of Chicago, for appellee ; Louis L. Dent, of counsel.
   Mr. Justice O’Connor

delivered the opinion of the court.

Charles H. Albers as receiver of the Cody Trust Company, an Illinois corporation, brought suit against the Indemnity Insurance Company of North America, a corporation, Cody Trust Company, a corporation, and Illinois Management Corporation, a corporation, on two fidelity insurance bonds for $25,000 each; each bond provided for the payment of loss to the Cody Trust Company caused by the dishonesty of its employees. The insurance company, hereafter called the defendant, filed its motion to dismiss on the ground that the complaint did not state a cause of action; the motion was sustained, the suit dismissed, and plaintiff appeals.

The material allegations of the amended complaint so far as it is necessary to state them here, are that the Cody Trust Company was duly qualified under the statute of this State to conduct a trust business and was engaged in the real estate mortgage and trust business. In the regular course of business as a trust company it received from its customers at different times deposits of money to pay taxes on real estate, interest on mortgages, and other trust matters, and it is alleged that between May 1, 1932, and December 12, 1933, while the two fidelity bonds in question were in force, trust moneys aggregating more than $155,000 were misappropriated for its own general corporate purposes through the wrongful acts of its employees; that when it received trust funds some of them were deposited in trust accounts in banks in Chicago and some were deposited to the credit of the Cody Trust Company in its own bank account, and that a part of these moneys, aggregating $155,000, was used by the Cody Trust Company to defray expenses in the conduct of its own business. It is further alleged that the Cody Trust Company became financially embarrassed and a suit was brought by the auditor of public accounts of the State of Illinois against it, in which suit plaintiff was appointed receiver. The prayer was for an accounting and for a decree for the amount so wrongfully used but not in excess of $50,000, the face of the two bonds.

The question for decision turns upon the construction of the two fidelity bonds, which are designated “Brokers’ Blanket Bond. Standard Form . . . For Private Bankers and Stock Brokers,” the pertinent portions of which are as follows:

“Indemnity Insurance Company of North America, , a corporation of the State of Pennsylvania, ... in consideration of an annual premium agrees to indemnify Cody Trust Company and/or Cody and Company, A. T. I. M. A. hereinafter called the Insured, against the direct loss, sustained while this bond is in force and discovered as hereinafter provided, of any money or securities, or both, as defined in Section 5 hereof, in which the Insured has a pecuniary interest, or held by the Insured as collateral, or as bailee, trustee or agent, and whether or not the Insured is liable therefor (such money and securities being hereinafter called Property), in an amount not exceeding Twenty Five Thousand Dollars as follows:

‘ ‘ (A) Through any dishonest act, wherever committed, of any of the Employes, as defined in Section 6 hereof, whether acting alone or in collusion with others.

“Section 6. The word ‘Employes’ as used herein shall be deemed to mean the officers, clerks and other persons in the immediate employ of the Insured during the currency of this bond . . .

“Section 7. This bond does not cover . . . (d) Any loss resulting directly or indirectly from the act or acts of any director of the Insured, other than one employed as a salaried official. ...”

There is no allegation in the amended complaint that any of the $155,000 was used by anyone except the Cody Trust Company itself, nor is there any allegation that any of such money was used for any purpose other than the corporate purpose of the Cody Trust Company. From the provisions of the bond, above quoted, the defendant insurance company agrees to indemnify the Cody Trust Company against loss sustained by it, and from the allegations of the amended complaint it appears that the Cody Trust Company did not sustain any loss, but on the contrary appropriated $155,000 of its customers’ money to its own use. The bond was not for the benefit of persons dealing* with the Cody Trust Company.

In National Surety Co. v. Fletcher Savings & Trust Co., 201 Ind. 631, suit was brought on two fidelity bonds, against the surety company, by receivers of the German Investment and Securities Company seeking to recover a loss claimed to have been sustained through the dishonesty of one of its employees who was its treasurer and manager. In that case the insured, engaged in the real estate loan business, was trustee in trust deeds given to secure mortgage bonds. Moneys were paid to the insured by its customers which, through the dishonesty of the insured’s treasurer, were used for the current expenses of the insured. The complaint, in several paragraphs, alleged claimed breaches of the bonds. In paragraph “E” of the complaint it was alleged that the insured company, “as trustee, took mortgages on real estate to itself securing notes and bonds issued thereunder”; that the insured company sold its bonds to its customers; that some of the bonds contained a provision giving the mortgagors the right to pay the whole or any part of the principal ■ before maturity; that in a number of instances the mortgagors exercised such right of prepayment and paid to the insured company moneys on account of the principal of the mortgage bonds; that with knowledge of these facts an employee of the insured dishonestly used such trust funds for the use of the insured. A demurrer was interposed to this paragraph of the complaint, which the court overruled. An appeal was taken-to the Appellate Court of Indiana where the judgment of the trial court, in this respect, was affirmed (154 N. E. 672). The Appellate Court there said (p. 675): that more than $7,000 was paid to the company as trustee as charged under paragraph “E” of the complaint; that the employee, “with full knowledge of the circumstances under which such money was paid to the company, with knowledge that the money so paid as alleged in ‘E’ . . . was held by the company as trust funds, and with full knowledge that the company was hopelessly insolvent, dishonestly and wrongfully appropriated such trust funds to the use of the company, and commingled them with the funds of the company, and then unlawfully and wrongfully used such trust funds in the business of the company, so that, when the holders of the bonds . . . presented such bonds for payment the company had no money with which to pay them.” A further appeal was taken to ■ the Supreme Court of Indiana where the judgments of the trial court and of the Appellate Court, by which the demurrer to paragraph “E” was overruled, were reversed with directions to sustain the demurrer to that paragraph. (201 Ind. 631.) The court there said (p. 642): “Certain conclusions as to loss are pleaded in the specifications of the alleged breaches of the bond. But it appears from the facts therein stated that the German Investment and Securities Company [the insured] did not suffer any loss from the fraud, dishonesty, forgery, theft, or wrongful abstraction of Seidensticker as to alleged breaches B, D, E, F and G. The bond was not for the benefit of any other corporation or person. The demurrer as to these alleged breaches of the bond should have been sustained.” To the same effect is Corn Belt Bank v. Maryland Casualty Co., 281 Ill. App. 387.

Counsel for plaintiff, in support of his contention that “the Cody Trust Co. in its trust capacity and as representative of the trust beneficiary sustained a loss within the meaning of the bond sued upon, ” cites Fitchburg Sav. Bank v. Massachusetts Bond. & Ins. Co., 274 Mass. 135; Maryland Casualty Co. v. American Trust Co., 71 F. (2d) 137, and other cases.

In the Fitchburg Savings Bank case suit was brought “on a bankers’ blanket bond” of indemnity which indemnified it against loss “due to any dishonesty or criminal act on the part of any of the officers or employees of the insured. ’ ’ While the bond was in force the insured’s treasurer diverted the bank funds for his own benefit and it was held that the bond would cover such loss. In that case the insured’s money was used by one of the officers for his own benefit, while in the instant case the insured Cody Trust Co. used the moneys of its customers to pay its own obligations. It is obvious that the cases are entirely dissimilar. So, too, in the American Trust Co. case, which was a suit brought on a fidelity insurance bond by the insured bank. It there appeared that the president of the bank had secretly procured loans from the bank through straw men so that he and other parties might speculate in securities, and the money was so used that there was a breach of the bond in that the bank had sustained a “direct loss.” The distinction between that case and the case at bar is obvious.

Before entering judgment of affirmance we must again call attention to the use of the confusing symbol “and/or.” Since we felt obliged to quote part of the bond where this monstrosity appears, we once more condemn its use lest by passing it over we seem to approve. Of course counsel are not responsible for the dereliction of those who drew the bond. This court has in many cases condemned in unmeasured terms this “accuracy destroying symbol.” Some of these are Preble v. Architectural, etc. Union, 260 Ill. App. 435; Tarjan v. National Surety Corp., 268 Ill. App. 232; City Nat. Bank & Trust Co. v. Davis Hotel Corp., 280 Ill. App. 247. See also Ex parte Iratacable, 55 Nev. 263, 30 P. (2d) 284; State v. Beacon Pub. Co., 141 Kan. 734, 42 P. (2d) 960; Bell v. Wayne United Gas Co., — W. Va. —, 181 S. E. 609; Irving Trust Co. v. Rose, 67 F. (2d) 89; Commercial Standard Ins. Co. v. Davis, 68 F. (2d) 108; Employers’ Mut. Liability Ins. Co. v. Tollefson, — Wis. —, 263 N. W. 376. In the case last cited the coverage clause insured the defendants “C. D. Brower, Jr. and/or the Sturgeon Bay Company,” as the “named assured.” The court said (p. 377):

“It is manifest that we are confronted with the task of first construing ‘and/or/ that befuddling, nameless thing, that J anus-faced verbal monstrosity, neither word nor phrase, the child of a brain of some one too lazy or top dull to express his precise meaning, or too dull to know what he did mean, now commonly used by lawyers in drafting legal documents, through carelessness or ignorance or as a cunning device to conceal rather than express meaning with view to furthering the interest of their clients. We have even observed the ‘thing’ in statutes, in the opinions of courts, and in statements in briefs of counsel, some learned and some not. . . . This gives to ‘ and/or ’ all its implications. It renders somewhat inexact our reference to the ‘verbal monstrosity’ as ‘Janus-faced/ for it imputes to it more than two faces, but the appellation may stand for want of one better fitting.”

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

Judgment affirmed.

McSurely, P. J., and Hatchett, J., concur.


author: Mr. Justice Friend

text:
    First National Bank of Chicago, Appellee, v. Bryn Mawr Beach Building Corporation et al., Appellees. Holman D. Pettibone et al., Appellees, v. Bryn Mawr Beach Building Corporation et al., Defendants, on Appeal of Bernard D. Harris et al., Appellants, and Alvina Schneler et al., Co-Appellants.
    Gen. No. 38,246.

      Opinion filed January 13, 1936.
    Shulman, Shulman & Abrams, Ward, Curtis & Polín, Aaron Soble and Harry Abrahams, all of Chicago, for appellants; Meyer Abrams, of counsel.
    Miller, Gorham, Wales & Adams, of Chicago, for appellees.
   Mr. Justice Friend

delivered the opinion of the court.

Subsequent to the entry of a decree of foreclosure and sale by the superior court an intervening petition was filed by a protective committee, after the term in which the foreclosure decree had been entered, to construe the terms of a deposit agreement, approve a plan of reorganization and confirm the foreclosure sale held in pursuance of the plan. Before the confirmation of the sale one of the nondepositing bondholders filed a petition asking that the foreclosure proceeding be consolidated with a suit for the liquidation of the mortgagor corporation which had been filed in the same court prior thereto. The court permitted the filing of the petition but denied the prayer thereof, approved the report of sale and with certain modifications also the plan of reorganization submitted by the committee, directed the trustee, who had been in possession of the property during the pendency of the suit, to file a report and account of its operations, and to distribute the net operating income on hand pro rata among all the bondholders. From that order certain objecting bondholders, who will hereinafter be referred to as respondents, have prosecuted this appeal.

It appears that October 1, 1931, the mortgagor, Bryn Mawr Beach Building Corporation, paid the instalment of interest which became due on that date on all outstanding bonds, but failed to pay the $200,000 principal amount of bonds which had then matured. December 17, 1931, the default having continued for more than 30 days, the trustee, in accordance with the provisions of the trust deed, accelerated the maturity of all outstanding bonds, aggregating $6,000,000, and filed its bill for foreclosure. A foreclosure decree was entered February 20,1934.

During the pendency of the proceeding the trustee operated the mortgaged property for the benefit of all bondholders. The mortgagor corporation and the tenants of the building were designated as defendants in the foreclosure suit, and David H. Brill, who was appointed by the court as attorney for the nondepositing bondholders, appeared before the master to whom the foreclosure proceeding had been referred and the court on behalf of nondepositing bondholders throughout the proceeding. January 11,1935, the master published notice that the foreclosure sale would be held February 4, 1935. January 17, 1935, the trustee caused notice of the time and place of the sale to be mailed to all nondepositing bondholders. Harold C. Bull, acting as the nominee for the protective committee, bid in the property for the sum of $1,040,225.

Thereafter, February 9, 1935, the committee filed its petition averring in substance that it represented the holders of $5,183,400 of the outstanding bonds and that it had caused Bull to bid at the master’s sale as its nominee; that it had on December 18,1934, formulated a plan of reorganization for the property in connection with its bid at the foreclosure sale, and that it desired the court to consider the plan, notice of which had previously, on December 18, 1934, been sent to all non-depositing and depositing" bondholders; that it desired the court to determine whether the' plan was fair, equitable and just and within the rights and powers fixed in the deposit agreement under which the committee was acting; that it desired the court to supervise the consummation of the plan and accord to all bondholders who had not previously deposited their bonds an opportunity to participate in the plan upon such terms as the court might direct. The court allowed the committee to file its petition, authorized the issuance of process to certain depositing bondholders as representatives of all depositing bondholders and to certain nondepositing bondholders as representatives of that class. By the same order the court set the master’s report of sale and the petition for hearing March 20, 1935, and directed the master to notify all depositing and nondepositing’ bondholders of the time and place of the hearing, and that they might on that date present objections to the confirmation of the sale or to the plan of reorganization. Pursuant to that order the master sent a notice to all bondholders February 16, 1935, advising them of the hearing upon the proposed plan and confirmation of the foreclosure sale, and that any bondholder might file objections thereto and be heard by the court. When the matter came on for hearing March 20 and 21, 1935, certain evidence was introduced by the committee and by respondents, and bondholders were advised that the committee would welcome any changes in the plan of reorganization which the court might consider advisable for their protection. The court then took the matter under advisement until April 3,1935. On that date Bernard D. Harris filed a petition asking that the foreclosure proceedings be consolidated with a suit for liquidation of the mortgagor corporation which he had filed in the superior court February 28, 1935. When his petition was presented no process had been served upon the mortgagor corporation in the liquidation suit, and it was not at issue. The court permitted the filing of the petition, but denied the prayer thereof, entered an order approving the report of sale, the plan of reorganization submitted by the committee with some modifications, and, as heretofore stated, directed the trustee to account, provided that objections to its account be filed within a short date and ordered the distribution of the net operating expenses pro rata among all bondholders.

The property under foreclosure consists of a 19-story and basement apartment hotel, located at 5555 Sheridan road, adjoining the Edgewater Beach Hotel. The building contains a total of about 1,550 rooms, composing apartments of various sizes, mostly unfurnished. There are numerous shops on the street level, the building contains a large garage, swimming pool, dining room, barber shop, beauty parlor and commissary. A total of 7,754 bonds, for the aggregate principal amount of $6,000,000, were issued and outstanding against the property. When the reorganization plan was announced, December 18, 1934, more than 3,150 persons had deposited bonds aggregating $5,183,400 with the committee, and some 750 persons had not deposited their bonds.

Respondents advance two major contentions for reversal of the court’s supplemental order or decree. It is first urged that the court lacked jurisdiction to pass upon the plan and to construe the deposit agreement, after the expiration of the term during which the foreclosure decree was entered. Respondents take the position that the committee’s petition was filed as a pretext for invoking the court’s jurisdiction to construe an agreement which was in nowise ambiguous and required no construction or interpretation; that the decree became final February 20, 1934, and the court reserved jurisdiction therein solely to pass upon the approval of the sale and the trustee’s accounting or to enforce the provisions of the decree; and that since none of these matters was made the subject matter of the petition the court was wholly without jurisdiction to entertain the intervening petition after term.

It may be conceded that this was a final decree. (Myers v. Manny, 63 Ill. 211, 213; Kirby v. Runals, 140 Ill. 289, 295.) Respondents cite two Illinois cases and one recent decision of the Circuit Court of Appeals (U. S.) for this district, to support the contention that ' the court lacked jurisdiction. In Totten v. Totten, 299 Ill. 43, a decree provided for the payment of certain money found due under a warranty deed which was held by the decree to be a mortgage. After prosecuting an appeal from the decree, which was affirmed, a petition was filed in the circuit court to extend the time within which to pay the sum specified in the decree, and the court granted the extension. The contention was made that the court was without jurisdiction of the subject matter and had no authority to extend the time for payment, because the term at which the original decree was entered had expired. It was held that while usually a court of equity has no power, after final decree, to amend, modify or alter the principles of the decree, the court retains and possesses the power to control the time and manner of the execution of its judgments and decrees.

Haase v. Haase, 261 Ill. 30, was a partition proceeding. Appellant claimed to have purchased the premises and to have the right to have the title conveyed to him. It appears from the decision, however, that he knew of the pendency of the suit before decree, but did not choose to intervene at that time and become a party to the proceedings as he had a right to do. After decree he sought to intervene and the court said it was then too late; that after a cause has been heard and determined between the parties there can be no intervention by a third party, and that any rights he may have must be made the subject matter of an original proceeding.

In Sorenson v. Collins, 77 F. (2d) 166, a final decree of foreclosure had been entered in the circuit court of Cook county, and thereafter the mortgagor filed a petition in the U. S. District Court, under section 74 of the 1934 amendment to the Bankruptcy Act, alleging that he was unable to meet his debts and that he desired to effect a composition or extension of time within which to pay the same, and seeking an injunction to restrain the foreclosure sale in the state court. The amendment to the Bankruptcy Act contains a proviso that it shall not affect proceedings in which a “final decree” has been entered, and the circuit court of appeals simply held that the federal court had no jurisdiction to stay the proceeding in the State court because the decree there entered was “a final decree.”

Under the decree of the superior court, entered February 20, 1934, in addition to each and every other provision made for the execution and enforcement thereof, the court reserved to itself full and complete jurisdiction of the cause for certain specified purposes, and “for the purpose of entering such other or further order or orders not inconsistent with this decree as to the court may seem necessary or proper. ’ ’ The question therefore arises whether, under the terms of the decree and the general powers which a court of equity possesses to enforce the execution of its judgment orders or decrees, it had jurisdiction to entertain the petition and in connection with the motion for confirmation of the sale to pass upon the fairness of the reorganization plan and the powers of the committee, under its depositary agreement, to carry out the plan.

The adequacy of bids in connection with foreclosure sales has presented serious difficulties to courts during the years of depression. The question frequently arises whether the bid adequately represents the value of the property being sold. In the case of large foreclosures it has been difficult, if not impossible, to obtain cash bids commensurate with appraisals and values established during the years of prosperity. Competitive bidding at foreclosure sales has been almost unknown. Accordingly, various forms of reorganization have been employed to secure for bondholders securities offering reasonable probabilities of future return on their investments. In this connection bondholders’ committees have been created and plans presented to the courts for approval in connection with foreclosure sales. Usually the question of jurisdiction has not -arisen because under the better practice employed in both state and federal court reorganizations, the machinery for determining the fairness of the plan has usually been set up by the foreclosure decree, and final approval of the plan has been specifically reserved until after sale. In the case of railroads, utilities and other large reorganizations effected in the federal courts, in some instances reorganizers have submitted their plan and procured a determination of its fairness in advance of the decree or of the sale. (Habirshaw Electric Cable Co. v. Same, 296 Fed. 875.) While such procedure may he of considerable advantage to reorganizers, because it eliminates any possibility that the sale may be upset and a resale made necessary in the event the plan should not prove to be equitable, there is some doubt whether in advance of sale the question of the fairness of any particular plan may not be moot, and hence such a determination at that stage not binding. (Swaine on Reorganization of Corporations, vol. 27, Columbia Law Review, 901; Guaranty Trust Co. v. Missouri Pac. Ry. Co., 238 Fed. 812.) It has, therefore, become the established practice under the decisions of recent cases to determine the fairness of the plan upon application for confirmation of the sale pursuant to the plan. This practice was developed prior to the enactment of amendment 77-B and rests upon the inherent equity powers of the court as appears from the following-decisions. (Guaranty Trust Co. v. Missouri Pac. Ry. Co., supra; Westinghouse Electric & Mfg. Co. v. Brooklyn Bapid Transit Co., U. S. District Court, S. D. N. Y. Cons. Cause Eq. No. E-15-37, not reported; Central Union Trust Co. v. Missouri, K. & T. Ry., U. S. District Court, E. D. Mo., E. Div., Cons. Cause Eq. No. 4564, not reported; North American Co. v. St. Louis & S. F. R. R., U. S. District Court, E. D. Mo., E. Div., Cons. Cause Eq. No. 4174, not reported.) Under the cases cited by the parties hereto, that procedure was usually followed.

The decree herein reserved jurisdiction for certain specified purposes and for the purpose of entering such other or further orders not inconsistent with the decree as to the court might seem necessary or proper. Notwithstanding the absence of a specific reservation in the decree to consider and pass upon the equity of the plan, we think the supplemental order was within the reservation provided. The decree ordered the property to be sold, and of course retained jurisdiction to pass upon the master’s sale thereof. Since the sale was but a step in connection with a plan for the reorganization of the property, the court could not very well have disassociated the plan from the bid price. Judged by standards of values existing during prosperous times, cash bids at recent foreclosure sales have generally seemed inadequate. Therefore, in determining whether the sale should be approved, the court had of necessity to inquire into the équity of the plan, as it affected the interests of all parties whose rights the court was bound to safeguard, to determine whether the sale was fair. Some 86 per cent of the bondholders had deposited their bonds in pursuance of the plan of which they had full notice. The nondepositing bondholders also had notice of the plan, for on December 18, 1934, several months before the committee’s petition was filed, they as well as all depositing bondholders were notified that a plan had been formulated for the reorganization of the property in connection with the bid at the foreclosure sale. All parties who objected to the sale and the plan were afforded an opportunity to be heard. The court also considered the alternative plan proposed by a small minority of bondholders. After hearing, the committee’s plan was approved and the sale had in connection therewith was confirmed. In the supplemental decree entered by the court the principles of the original decree were in no way changed, modified or altered, and unless it be held that courts of equity wholly lack the power to consider and approve or reject plans for the reorganization of properties in connection with foreclosures, the reservations in the original decree herein sufficiently vested the court with continued jurisdiction to enter all orders necessary for the protection of parties in interest and in aid of the execution of its decree. The jurisdiction of the court was similarly challenged in Chicago Title & Trust Co. v. Bamburg, 278 Ill. App. 1, and the court, in discussing the question under consideration, said (p. 12):

“In behalf of the appellants it is urged, in the first place, that the decree entered in 1931 was a final decree; that the supplemental decree thereafter entered undertook to materially vary the terms and provisions thereof, and that the court was wholly without jurisdiction to do this after the term had expired at which the decree was entered. We are not impressed with this contention. The original decree reserved jurisdiction for certain purposes, and the supplemental decree was within the reservations thus provided. It is the general rule, as appears from the cases cited in the briefs, that the limitation of control of the court to the term at which the decree was rendered does not apply to the provisions inserted for the purpose of carrying the decree into effect. Sterling Nat. Bank v. Martin, 213 Ill. App. 566. To the same effect are Mariner v. Ingraham, 230 Ill. 130, and Totten v. Totten, 299 Ill. 43.” The Bamburg case was later reversed by the Supreme Court, but not on jurisdictional grounds.

In Eggers v. Adler, 248 Ill. App. 118, the question arose as to whether the court had jurisdiction to entertain a cross-bill, the term of court at which the original decree of foreclosure was entered and the master’s report of sale approved and affirmed having expired, and it was held that (p. 125):

“While the decree of foreclosure and sale is a final one, it does not necessarily dispose of all the issues in the case or the subject matter of the suit. As to undisposed of matters, the jurisdiction of the court would continue until the whole matter is disposed of, although, of course, further proceedings would not be allowed to change or modify in any way the final decree theretofore entered. The jurisdiction of the court of chancery over undisposed of matters does not end at the expiration of the term at which a particular final decree may be entered. We think the court was not without jurisdiction and that the order was equitable and just, and it is affirmed.”

The more vital question involved in this proceeding is whether a court of equity will in any event entertain jurisdiction to consider and pass upon the equity of a reorganization plan in connection with the sale of property in foreclosure proceedings. Reorganizations under the statutes of England and Canada, where they are generally called “reconstructions,” differ somewhat from the procedure in this country, in that they are accomplished by a decree of court approving a plan agreed upon by a specified part of the bondholders and upon approval it is binding on all the stockholders and creditors. These statutory reorganizations of railroads in England and Canada take the place of foreclosure sales in the United States which in general accomplish substantially the same result with more expense and greater delay. (Fletcher Cyclopedia of Corporations, vol. 15, sec. 7273.) Under a recent amendment of the Bankruptcy Act (section 77-B, 11 U. S. C. A.) similar to the British Companies’ Act, the federal courts in this country have been especially empowered to entertain jurisdiction for the purpose of passing upon reorganizations. Security holders are allowed to express their attitude toward the plan and it is possible to bind dissenting bondholders.

Many years prior to the enactment of this statute, however, the federal courts, under a long line of decisions, sanctioned the method of reorganizing defaulted bond issues by the purchase of the property under foreclosure at judicial sale through a committee acting for all bondholders who desired to participate in a reorganization of the property. (Shaw v. Little Rock & Fort Smith Ry. Co., 100 U. S. 605; Habirshaw Electric Gable Co. v. Same, 296 Fed. 875; Fearon v. Bankers Trust Co., 238 Fed. 83; Guaranty Trust Co. of New York v, Missouri Pac. Ry. Co., 238 Fed, 812; Phipps v. Chicago, R. I. & P. Ry. Co., 284 Fed. 945; St. Louis San Francisco Ry. Co. v. McElvain, 253 Fed. 123; Graselli Chemical Co. v. Aetna Explosives Co., 252 Fed. 456.) The policy of the federal courts toward reorganization of properties in foreclosure and other suits, solely on equitable grounds, is well expressed in Graselli Chemical Co. v. Aetna Explosives Co., supra, as follows:

“A court of equity’s modes of relief are not fixed and rigid. It can mold its remedies to meet the conditions with which it has to deal. ’ ’ Mr. Justice Ward, in his dissenting opinion in that case, stated the principle more definitely by saying that:

“When a court is selling the whole property of a corporation under a decree of foreclosure, with a view to distributing the proceeds of sale among the parties entitled, it may properly look into the fairness of any plan of reorganization under which the property has been purchased or is proposed to be purchased. In other words, the court will affirm the sale if the terms of the reorganization agreement are fair, and will refuse to do so if they are not.”

Courts of other States have followed this practice upon the assumption that courts of equity have the inherent power to consider reorganization plans in connection with foreclosure sales. In Clinton Trust Co. v. 142-144 Joralemon St. Corp., 263 N. Y. S. 359, decided in March, 1933, the court was confronted with the question whether it could properly consider a plan of reorganization in the pending foreclosure proceeding, and in holding that it had such power, said (p. 364):

‘‘ The way is not unblazed if it be thought that we are pioneering in a new field. In the federal jurisdiction it has been comparatively common for courts to take cognizance of reorganization plans in foreclosure and other suits, and to withhold judgment or confirmation of a sale until some fair and open plan of reorganization was presented and substantially agreed upon. 9 5

The same court in Chase Nat. Bank v. 10 East 40th St. Corp., 264 N. Y. S. 882, decided in June, 1933, considered the question involved and in holding that it had the right to pass upon the plan of reorganization, said (p. 888):

“In the case of a strict foreclosure whereby the equity of the mortgagor is entirely wiped out, a comparatively simple problem is presented. Prior to 1899 it seemed to be the general impression that mortgage bondholders could combine with the stockholders of the corporation and readjust the entire property to suit themselves, to the extinction of all intermediary claimants and even to the injury of the mortgage bondholders themselves. Then came the leading case of Louisville Trust Co. v. Louisville N. A. & C. Ry., 174 U. S. 674, the Monon case. This decision of the United States Supreme Court held that, with the large amount of the property involved or for other reasons, sales in foreclosure could not be expected to bring real competitive bidding, and that in such cases the foreclosure action was only a step in a reorganization of the corporation, and that the transaction was as if the mortgagor had conveyed directly to the reorganization company in fraud of the rights of lien and of unsecured creditors. . . .

“Until recent years foreclosures of trust mortgages were almost entirely brought in the federal courts, and the state courts were not called upon to enforce the doctrine laid down by the U. S. Supreme Court in Louisville Trust Co. v. Louisville N. A. & C. Ry., supra. At the present time, however, there have been a large number of foreclosures of real estate trust mortgages, and the state courts are called upon to apply the principles and practices enunciated in the United States Supreme Court case. Indeed, it seems to us absurd for the appellants to urge, as they do in this case, that the state courts are incapable of doing the same equity as have the federal courts.” (Italics ours.)

Text writers on the subject of reorganization of bond issues are generally of the opinion that it is imperative for a committee to act on behalf of the bondholders. “The position of these bondholders is then precarious (after default) ... To preserve their interests, they must act together, through representatives, in devising and carrying out a plan of reorganization.” (Rogers, 42 Harvard Law Review, 899.)

“Any attempt to introduce democracy in this reorganization practice calls for analysis of just what corporate reorganization does. . . . Foreclosed bonds may have to compromise with junior interests to avoid delay or resort to them as the most likely source of any money. What terms shall they offer % These are the commonplace problems of reorganization. Forty thousand scattered bondholders cannot settle them at a town meeting. Vicarious negotiation is inevitable. If this negotiation is to be effective and expeditious, the negotiators must be able to speak with authority. Bondholders’ representatives cannot defend in open debate the concessions they are about to make, without convincing the stockholders that better terms should be offered them. The atmosphere of disappointed hope, which hangs over the whole enterprise makes it peculiarly difficult to satisfy everyone. If practically all, or two-thirds, or even a bare majority, have to ratify a plan when made, then the negotiators must so arrange it that they already have the ratifying votes in their pockets when they start to bargain. The alternative is a chaos of interminable talk.” (Foster, 43 Yale Law Review, 352, 357.)-

The formation of committees, recognized by the courts from the very beginning as legal, has continued to receive their sanction and support as the necessity of the committee has become apparent. For many years, in the case of railroads, public utilities, large industrial enterprises, and during the depression in the case of large real estate properties, the state courts have been faced with the fact that their judicial sales on foreclosures produced no competitive bidding, and that the only prospective purchaser will be, and can be, none other than the security holders acting in concert. This fact was recognized in Canada Southern R. R. Co. v. Gebhard, 109 U. S. 527, wherein the court said (p. 539):

“It rarely happens in the United States that foreclosures of railway mortgages are anything else than the machinery by which arrangements between the creditors and other parties in interest are carried into effect, and a reorganization of the affairs of the corporation under a new name broug’ht about. ’ ’

The same may be said of foreclosures on large hotel and industrial properties having numerous bondholders scattered throughout the country. Courts have been unable and unwilling to deal separately with each of the security holders represented in a foreclosure involving a large and complicated financial structure, and have frequently denied intervention to individual bondholders until a showing was made that the trustee or someone acting on behalf of the bondholders was unfaithfully discharging his duties toward security holders. (American Trust & Safe Deposit. Co. v. 180 East Delaware Bldg. Corp., 262 Ill. App. 67, 72, decided by this division of the court.)

It was said in Parker v. New England Oil Corp., 8 F. (2d) 392, that:

“The natural and necessary course of the court has been to promote the organization of these groups and the selection by them of committees, frequently appearing in court by counsel, in order that these representatives may work out and present to the court a plan of reorganization, agreed upon so far as possible. The court has neither time, capacity, nor disposition to instruct the scattered owners of a receivership estate as to.how they may best reorganize their property in order to end the court’s control of it. The present practice tends to remit the court to its ordinary and proper function of dealing merely with controversial questions or of settling rights between conflicting interests.”

It thus appears that the method of reorganizing through a bondholders’ committee which was approved by the courts as far back as 1880 in Wetmore v. St. Paul & Pacific R. Co., 3 Fed. 177, has generally been recognized by the legal and business worlds as the only feasible method of reorganization.

Except for the case of Straus v. Anderson, hereafter considered, we are unable to find any case in this State, decided by a reviewing court, where the precise question of jurisdiction was directly passed upon, but the practice has been sanctioned by clear implication in several instances. In Chicago Title & Trust Co. v. Robin, 361 Ill. 261, the chancellor on the hearing of the motion to confirm the report of sale and the Appellate Court both considered the plan submitted by the committee, which through its nominee was the purchaser at the sale and as such was entitled to join in the motion for confirmation thereof. The court said that the bid will be confirmed in the absence of “fraud, mistake or violation of duty by the officer making the sale or by the purchaser.” (Italics ours.) We take this to mean that it becomes the duty of the court to review the plan to determine if the purchaser, who in this instance was the committee, has acted properly.

In First Nat. Bank of Chicago v. LaSalle-Wacker Bldg. Corp., 280 Ill. App. 188, the chancellor had entertained jurisdiction to consider and pass upon a plan for reorganization submitted by a bondholders’ committee after the foreclosure sale. The discussion in that case revolves entirely around certain changes made in the plan of reorganization as a result of the efforts of a group of minority bondholders who had intervened for that purpose. An appeal was taken from that part of the decree allowing attorneys’ fees to the objectors for services rendered by them in procuring the modification of the plan. Inherent in the opinion of the Appellate Court is the recognition that the chancellor was justified in considering the fairness of the plan of reorganization as part of the foreclosure proceeding. Although the question of jurisdiction was not raised, obviously if the court had been of the opinion that the chancellor did not have jurisdiction of the subject matter it would not have considered the plan of reorganization and the fees to be allowed to the attorneys for various parties in interest.

In American Nat. Bank & Trust Co. v. Illinois Improvement & Building Corp., 281 Ill. App. 17 (decided by the third division), the Appellate Court impliedly sanctioned the foreclosure proceeding as a prelude to the reorganization contemplated by the bondholders ’ committee, for in its opinion the court discusses the charges made against the bondholders’ committee and the plan by nondepositing bondholders.

Courts have recognized the reorganization of properties through committees for upward of half a century and the practice is abundantly sustained by authority. The only case called to our attention holding-otherwise is the recent decision of another division of this court (Straus v. Anderson, 283 Ill. App. 342). The bid price and other circumstances in that case impelled the court to reject the sale and reverse the supplemental decree. It was held in effect, however, that courts of equity have no jurisdiction to pass upon plans for reorganization submitted by a committee of bondholders, or to supervise the consummation thereof; that the plan submitted to the court for its approval is but “a declaratory decree” and not germane to the issues involved, and that it did not settle the rights of the parties in interest. The opinion neither discusses the historically established practice nor the many authorities approving reorganization of properties through committees in foreclosure proceedings. The court cites Chicago Title & Trust Co. v. Robin, supra, to support its conclusion. That case turned on three questions, and the court held: (1) that a trustee could not be required to bid in the property on behalf of all bondholders because there was no authority therefor in the trust deed; (2) that the court could not fix an upset price at the foreclosure sale; (3) that mere inadequacy of price, alone, would not justify the court in disaffirming the sale. None of these propositions is pertinent to the jurisdictional question involved. After careful consideration we are compelled to differ with the conclusion there reached, because it is not in harmony with current authority and renders a court of equity powerless to meet the conditions with which it has to deal.

The basic general principles of law involved in the question here under consideration affect many large and valuable properties in foreclosure in the State courts. Within a year the chancellors of the circuit and superior courts have promulgated rules requiring that sales be had in all pending foreclosures within 30, 60 or 90 days after entry of the foreclosure decree, depending upon the security of the issues involved. Since litigants are required to comply with this practice, in the absence of competitive bidding at foreclosure sales, properties will inevitably be purchased for such amounts as the interested parties consider reasonable. ■ Many of these bids will seem inadequate, but under the decision in Chicago Title & Trust Co. v. Robin, supra, “mere inadequacy of price, alone,” will not justify the courts in disaffirming sales. If the conclusion reached in Straus v. Anderson, supra, were adhered to as a general basic principle, bondholders would of necessity have to be satisfied with their proportionate shares of nominal cash bids, and would in most instances be infinitely worse off than under most fair reorganization plans. They would be deprived of expressing their attitude toward any proposed plan before the court, and driven to the necessity of either participating in plans formulated by committees, not always .safeguarded by such modifications as courts might impose, or accepting a small pro rata share of the nominal cash bids made at sales. It is the duty of courts to assist bondholders in such a situation as stated by Mr. Justice Baker in Investment Registry v. Chicago & M. E. R. Co., 212 Fed. 594, 609:

“Most commonly the controversy over the sale arises when there are non-assenting bondholders. When such controversy is on, the chancellor, in our opinion, not only has the right but owes the duty of being vigilant to see, on the one hand, that a dissenter be not permitted to create a maneuvering value in his bonds by opposing confirmation, and, on the other, that the majority does not use its power, unique in sales of this class, to oppress a helpless minority.”

Since foreclosures are not statutory proceedings, courts of equity have the power to cope with problems presented and to safeguard the rights of all parties interested and should use every means to insure substantial justice to all parties involved. They have exercised their powers to do so from time immemorial and as Mr. Justice Baker said, “Courts of equity should be deemed no less powerful today than when the first chancellor looked to his conscience for guidance, to make fair dealing between man and man the test.” (Investment Registry v. Chicago & M. E. R. Co., 212 Fed. 594, 610.) We find abundant authority holding that they have the inherent right, duty and power to insure such justice. Federal courts have exercised these equity powers freely and with salutary effect. It would indeed be a serious commentary on the chancery practice of our State courts to hold that they lack the same equity powers as the federal courts.

It is argued that bondholders’ committees are self-' constituted groups, organized to gain advantages for themselves and those they represent, and through coercion to oppress minority interests. It may be conceded that some of the plans submitted to the courts fail to properly safeguard the interests of both assenting and nonassenting bondholders, but that is only an additional reason to support the doctrine that courts of equity should assume jurisdiction to examine the proposed plans, and, if they are not equitable, to make them so. The mere suggestion that a protective committee may overstep its bounds and serve its own interests, to the detriment of others who are unorganized, emphasizes the necessity for a procedure under which all parties may submit their differences. If it should be held that the court has no jurisdiction to assume that function, examine the plan proposed, modify it if necessary and approve or reject it, the “helpless minority” may obviously be left to the oppression of those who are strongly organized. It is partly for the very protection of this helpless minority that courts have assumed jurisdiction, and they will at the same time be vigilant to see that the dissenter be not “permitted to create a maneuvering value in his bonds by opposing confirmation” of plans which in equity serve the best interests of the whole group.

It is urged by respondents that the price bid at the sale was so low as to constitute fraud per se, and that, therefore, the sale should be set aside. The price bid was $1,040,225, and the sale was subject to the second one-half of the 1933 taxes, the 1934 taxes, and part of the 1935 taxes. On the basis of the 1933 tax assessment, the total unpaid and accrued taxes amounted to approximately $115,000; so that the price paid for the property by the participating bondholders was approximately $1,155,000. There is, uncontroverted evidence that at no time during the past 23 years has ' anyone paid as much as $1,500,000 cash for an apartment hotel building in Chicago. Various experts testified as to the value of the property based upon the different tests that appraisers use in determining property value. Respondents offered no evidence as to the value of the property, and upon the record made by the participating* bondholders the contention that the bid price was so inadequate as to constitute fraud per se is not convincing. There is no evidence of actual fraud, mistake or irregularity, and the mere inadequacy of price, alone, as was held in Chicago Title & Trust Co. v. Robin, 361 Ill. 261, is not cause for setting aside a judicial sale. It was there said that (p. 273):

“Public policy and the interests of debtors require that stability be given to judicial sales, and they should not be disturbed unless there has been some fraud, mistake or violation of duty by the officer making the sale or by the purchaser, none of which is shown here. ’ ’

As against the plan of reorganization submitted by the bondholders’ committee, respondents presented an alternative plan, to be consummated in connection with the proceeding* instituted by them on February 28,1935! Under their plan they proposed to have the trustee bid for all the bondholders, to have a receiver appointed for the mortgagor corporation who was to sell the equity of redemption in the property and the personal effects of the corporation to the trustee. Since the briefs in this case were written it was held by the Supreme Court in Chicago Title & Trust Co. v. Rohm, supra, that under this form of trust deed a court cannot require the trustee to bid in the property as proposed by the respondents, and therefore the major part of the alternative proposal must be disregarded.

The second major consideration involves the fairness of the committee’s reorganization plan. This plan, as modified by the court, provides for the prompt acquisition of merchantable title to the real estate and all furniture and other personal property necessary to the operation of the premises and its transfer to the First National Bank of Chicago, as trustee under a liquidation trust agreement. Under the terms of this trust the entire net income and proceeds of any sale of the property are payable to participating bondholders until they receive the full amount of the bonds originally held by them, plus interest thereon at the rate of five per cent per annum from October 1, 1931, the date of default by the mortgagor corporation.

Under the plan each participating bondholder will receive a 15-year registered income note, in the sum of $50, and a preferred unit of beneficial interest having a nominal value of $50 for each $100 bond originally held by him. The income notes are an obligation of the trust, and therefore a charge upon the property involved. They mature in 15 years, or upon a prior sale of the property or a prior determination of the trust, which may be terminated at any time after the first four years at the request of the majority of the holders of preferred units. The preferred units represent an interest in the income of the property to the extent of their nominal value, subject only to the income notes.

The reorganization plan provides that after the payment in each year of certain income upon the securities to be issued to the participating bondholders, one-half of the balance be placed in a sinking fund for the benefit of such holders. This fund is to be used first to retire income notes, and the trustee is authorized to purchase notes tendered for that purpose. Thus, if sufficient income can be derived from the property, bondholders who do not desire to speculate further with the property may accept what they consider a fair amount in cash. In the event that no notes are tendered for sale, the trustee is authorized to redeem the income notes by the payment of the full amount thereof, plus interest at five per cent from October 1, 1931. Should all income notes be retired through the operation of the sinking fund, then such fund will be used to purchase the preferred units tendered to the trustee. The preferred units are not redeemable through the sinking fund, so that the income from the property cannot be used to compel the holders thereof to part with them if they desire to continue their investment.

The plan provides for a corporate trustee, trust managers and the active management and operation of a company to be organized and supervised by William M. Dewey, managing director of the Edgewater Beach Hotel, which adjoins the property here involved. The contract for the active management of the property requires the personal services of Mr. Dewey, subject to supervision, control and direction of the trust managers, and may be terminated at any time if in their judgment or that of the corporate trustee its continuance is not for the best interests of the property. The First National Bank of Chicago is designated as the corporate trustee, and there is a provision in the plan requiring its successor to be a Chicago bank or trust company having a capital and surplus of at least $1,000,000. The corporate trustee or its successor will hold legal title to the property and be responsible for the proper receipt and disbursement of all funds.

The following, as trust managers, are to determine questions of policy and supervise the management of the property: Hilbert H. Scribner, of Winston & Company, an experienced real estate man in Chicago, Raymond H. Schultz, a lawyer, and Abraham K. Selz, Schwab & Company, a well known business man. It appears that the chancellor made an independent investigation into the honesty, integrity and ability of these men before approving their selection, and invited those present at the hearing to state objections or reasons why they should not serve in that capacity.

The reorganization plan as submitted fixed the compensation to be paid to the management company and to the trust managers during the first year, and provided that all their fees should be restricted to reasonable compensation for the services actually rendered. The chancellor modified the plan by adding a further restriction that the aggregate amount of fees, together with the compensation to be paid the Dewey Management Company or to any other manager employed in its stead, should not in any event, except for good cause shown and pursuant to leave of court, exceed six per cent of the gross income received from rentals of rooms, apartments, stores, etc., plus an amount equal to six per cent of the excess of income over expenses derived from the operation of the commissary, restaurant and garage. Provision is made for the audit- • ing of the books and accounts of the trustee, annually, by independent certified public accountants, whose reports shall be sent to the beneficiaries at least once in each fiscal year, and the court modified the plan by adding the further provision that the trustee should account annually to the court.

The bondholders’ committee purchased the equity of redemption from the mortgagor corporation for $10,000, the contract of purchase providing that from the purchase price there be paid and discharged certain franchise taxes due the State of Illinois, which constitute a lien against the personal property of the corporation. Respondents complain of this feature of the plan, and designate it as a reward to the mortgagor and a benefit to its stockholders. However, since the mortgagor corporation is subject to a deficiency judgment for over $5,500,000, its stockholders are not likely to receive and retain any of this money.

It is proposed that Bull, the nominee of the committee, who purchased the property at the sale for $1,040,225, will present the participating bonds as a credit on this bid and pay the balance of his bid price in cash. The cash is to be derived from the participating bondholders’ share of the earnings of the property. Thereafter, a redemption from the foreclosure sale is proposed, which will enable the committee to give the trustee under the liquidation trust a clear merchantable title. Since the furniture and other personal property contained in the hotel is not subject to the lien of the mortgage, but only of the deficiency decree, it is proposed that a writ of execution under the deficiency decree be levied against the furniture and personal effects and sold by the sheriff at public auction. A representative of the committee will attend this sale and purchase the property necessary for the operation of the building as reasonably as possible. The proceeds of the sale, after deducting the costs thereof, will be paid to the trustee and distributed pro rata among the bondholders.

In its essential features this plan has apparently been very carefully worked out. The personnel of the board of trust managers, the trustee and managing director offer reasonable assurance that every effort will be made to carry out the plan with a view to preserving the property for those bondholders who participate therein, so that if the rentals and property - values are enhanced, they may in the future expect some reasonable return on their investment. Under the supplemental decree the nondepositing bondholders have a reasonable time within which to elect whether they desire to participate in the plan, and those who do not wish to participate and prefer their proportionate share of the cash bid will, with accumulated rentals, receive approximately 22 per cent of the value of their bonds.

Respondents raise various objections to the plan and urge other grounds for reversal of the supplemental order, but we find in them no convincing reasons for reversal. In view of our conclusion that the court had jurisdiction to entertain the intervening petition of the committee, that the plan is equitable and the sale fair, the supplemental decree of the superior court will be affirmed.

Affirmed.

Scanlan, P. J., and John J. Sullivan, J., concur.