text:
    Bohumil Routa, Appellee, v. Royal League, Appellant.
    Gen. No. 36,763.
    Opinion filed March 6, 1934.
    Heard in the second division of this court for the first district at the June term, 1933.
    Rehearing denied March 21, 1934.

      Weber, Miller, Deffenbaugh & Donovan and Arthur J. Donovan, for appellant.
    Werner W. Schroeder and Leon Lecour Drolet, for appellee.
   Mr. Presiding Justice Sullivan

delivered the opinion of the court.

Bohumil Routa, plaintiff, brought suit in assumpsit against the Royal League, a fraternal benefit society, defendant, to recover an amount alleged to be due upon a benefit certificate of insurance issued to Josie Lukes, January 24, 1918, which provided for the payment of $1,000 to plaintiff upon insured’s death while in good standing in the order. The trial court entered judgment for the amount of the certificate and interest totaling $1,040, after overruling defendant’s demurrer to plaintiff’s replications to the amended pleas of defendant and upon the election of defendant .to stand by its demurrer. This appeal followed.

The declaration is in the usual form, setting up the issuance of the benefit certificate and attaching a copy thereof as an exhibit, and alleging that Josie Lukes died February 1, 1931; that notice of her death was given to defendant; that subsequent to the issuance of such benefit certificate until the time of her death insured complied with all the terms, provisions and conditions of the benefit certificate, as well as the provisions of the constitution and general rules of the society; that plaintiff was her son and beneficiary and has at all times since the death of Josie Lukes complied with all the terms and provisions of the benefit certificate and of the constitution and general rules of the defendant on.his part to be kept and performed; that Josie Lukes ,;was a member in good standing- in the Royal League at the time of her death; and that her benefit certificate had not at that time been surrendered or otherwise canceled pr annulled, by means whereof defendant became liable to pay plaintiff $1,000 with interest thereon at five per cent.

Defendant filed four pleas to the declaration and thereafter by leave of court four amended pleas.

The first amended plea was a traverse which, together with the ’ similiter thereto, was withdrawn by agreement of the parties.

The second amended plea is a special plea setting up that the Boyal League is a fraternal beneficiary association; that June 13, 1918, Josie Lukes signed an agreement in writing for the purpose of securing membership in defendant society, which was a part of her application and medical examination, in and by which she agreed to be bound by the laws and regulations of the association. It alleged that thereafter on June 24, 1918, she was admitted to membership in Lady Lafayette Council of defendant organization, and in reliance upon her agreement a benefit certificate was issued to her June 29, 1918, for $1,000, payable to Albert Lukes, her husband; that June 23, 1924, she surrendered that benefit certificate and directed that a new one be issued to her payable to Bohumil Bouta, her son; and that July 3, 1924, a new benefit certificate was issued to her for $1,000 payable to Bohumil Bouta, her son, which provided, among other things:

“This certifies that Josie Lukes . . . has been regularly admitted to membership in said.Society as a member of Lady Lafayette Council, and that in accordance with and under and subject to the provisions of its laws, rules and regulations, is entitled to all rights, benefits and privileges of membership therein, and at her death prior to her attaining the age of seventy years, the sum of One Thousand dollars ($1,000) will be paid out of the Widows’ and Orphans’ Benefit Fund of said Society to Bohumil Bouta, beneficiary, bearing relationship to her of son, after satisfactory proof of her death has been made to the Society, together with the surrender of this certificate, provided, said member is in good standing in the Society at the time of her death, and provided, also, that this certificate shall not have been surrendered or otherwise cancelled or annulled. . . .
“The application for membership and medical examination signed by said member, and this benefit certificate, the articles of incorporation and the laws, rules and regulations of this Society, and all amendments, modifications and additions to each thereof, shall constitute the agreement between this Society and said member.”

It further alleged that there was in full force and effect laws of the association which provided that a combined monthly contribution or assessment was due and payable without notice on the first day of each calendar month, and that the failure to pay same on or before the last day of the current month automatically suspended the member from all benefits in the association, and the interest of the beneficiary ceased unless the member was subsequently reinstated; that within 10 days after suspension the member might be reinstated by the payment of the assessment, the failure to pay which resulted in suspension; that any member who had been suspended more than 10 days, but not more than a month, might be reinstated by the payment of all arrearages up to the time of reinstatement; that a member who had been suspended more than one month, but not more than two months, if in good health, might be reinstated by the payment of all arrearages up to the date of reinstatement, such payment to be considered a warranty of the good health of the member at the time of reinstatement and for 30 days thereafter; and that there was no right to reinstatement after a member had been under suspension two months; and if thereafter he desired to renew his membership he must make application as a new member.

This plea also set up other sections of the laws of the association which provided, in substance, that no officer or member of the supreme, advisory or subordinate councils shall have power to modify or waive any of the laws of the association; that the receipt and retention of combined monthly assessments or contributions shall not constitute a waiver of the laws of the association or any defense which might -have been availed of had such payment or payments not been received and retained.

It also alleged that Josie Lukes’ combined monthly contribution or assessment was $1.22 a month; that the assessment due from her on the first of September, 1930, was not paid by or for her to defendant on or before the last day of September, 1930, and that thereupon she became, was and stood suspended from all benefits in the association and the funds thereof; that she did not, nor did anyone for her, pay her assessment for the month of September, 1930, or any other monthly assessment or money whatever from the time of her suspension up to and including the date of her death, February 1, 1931; and that she did not reinstate herself as provided in the laws of the association at any time prior to her death.

The third amended plea contains all of the allegations set forth in the second amended plea and in addition thereto alleged that three days after the death of Josie Lukes some person, whose identity was unknown to the financial secretary of Lady Lafayette Council, paid that officer $9.12 for and on account of Josie Lukes, but such person did not disclose and the financial secretary did not know, nor did defendant know at that time that the insured had died previous thereto; that thereafter the financial secretary offered to return the $9.12 to plaintiff and tendered same to him but the money and tender were refused; that defendant is ready, willing and able to pay the $9.12 to plaintiff and will, upon leave of court, pay same to the clerk to be held for his benefit.

The fourth amended plea contains all of the allegations of the third plea and further alleged that when the $9.12 was paid to the financial secretary of Lady Lafayette Council the person who paid it did not disclose to the financial secretary, and she did not know nor did defendant know at that time that Josie Lukes was not in good health or that she had died previous thereto; and that at the time the $9.12 was paid, and prior thereto, Josie Lukes was not in fact in good health but was in fact dead, all of which was not then known to the financial secretary nor to defendant.

Plaintiff replied double to ‘the second, third and fourth amended pleas. No point is made on the filing of the double replications.

The first replication to the second amended plea alleged that plaintiff ought not to be barred from recovery because on February 3, 1931, the Royal League through the agency of the financial secretary of its Lady Lafayette Council, accepted from plaintiff in the name and to the account of Josie Lukes $9.12, issuing at the same time to plaintiff its receipt for that sum; that the $9.12 represented and paid in full the combined monthly assessments and contributions due in accordance with the laws, rules and regulations of the Royal League and its contract with Josie Lukes for September, October, November and December, 1930, and January and February, 1931; that by its act in accepting such combined monthly assessments and contributions defendant waived its laws, rules and regulations, its agreement with the deceased, Josie Lukes, and any and all defenses of which it might have availed itself or upon which it might have relied because of the failure of the insured to make such payment, and especially and particularly its right to declare her suspended from membership in the Royal League, her benefit certificate forfeited or canceled, or the liability of the Royal League under such benefit certificate terminated.

The second replication to the second amended plea contains the same allegations as the first replication, and in addition thereto it alleged that prior to February 3, 1931, and prior to the death of Josie Lukes, it had been and was the custom and established practice of the Royal League in regard to her and other members of that society of the same status and standing, to accept combined monthly assessments and contributions more than two months in arrears, and that she relied and depended upon this custom and established practice of defendant in delaying until February 3, 1931, the payment of her monthly assessments for September, October, November and December, 1930, and January and February, 1931.

The replications to the third and fourth amended pleas contain the same allegations as the replications to the second amended plea except that they acknowledge the tender of $9.12 and acceptance of same on account.

Defendant contends that the member, Josie Lukes, having defaulted in the payment of the assessment due September 1, 1930, was, ipso facto, suspended by the automatic operation of the terms of the contract of insurance on the last day of that month, and that although her contract contained provisions by means of which she could have reinstated herself within the first 10 days, within the first month, or within the first two months after suspension, she did not avail herself of them; that the member died February 1, 1931, without having made an attempt subsequent to her suspension to reinstate herself or to again affiliate herself with the society; that she was not in good standing and her benefit certificate was not in force at the time of her death; and that payment to and acceptance by the financial secretary of the subordinate council of the $9.12 covering delinquent assessments, after the death of the member, could under no circumstances constitute a waiver by defendant of its rights under the contract and certainly not when the party making the payment did not inform the financial secretary that the member was at that time dead and neither the financial secretary nor defendant knew that the member had died two days before.

Plaintiff’s theory is that there had been a custom and practice in the Eoyal League to accept from Josie Lukes, and other members known to her of the same status and standing in the society, assessments more than two months in arrears, and that she relied and depended on this custom and established practice in delaying the payment of the assessments for September, October, November and December, 1930, and January and February, 1931; that her benefit certificate never lapsed and was never considered by defendant to have lapsed, as was evidenced by its acceptance of six months’ delinquent assessments on her account February 3,1931; that defendant’s practice and course of dealing with the insured, and other members known to her, of accepting from them delinquent assessments amounted in law to a waiver of any forfeiture it might otherwise have insisted upon by reason of default in the payment of her assessments; that, in addition to this admitted custom and practice, defendant’s acceptance and willingness to accept the delinquent assessments February 3, 1931 (even though insured’s death was unknown to it or its financial secretary), was evidence of the fact that the insured was still recognized by the society as a member; that, under such circumstances, defendant is estopped from asserting a forfeiture of the rights of the insured or her beneficiary under her benefit certificate; and that the question presented for determination on this appeal is not that of claimed reinstatement by reason of the payment of delinquent assessments after the death of the member without notice to the society or its agent of such death, but rather that of estoppel from asserting a forfeiture against a continuing membership with all of its rights under the benefit certificate.

Defendant contends that the doctrine of waiver should not be applied to fraternal benefit societies. To so hold would be to ignore and disregard the established law of Illinois. This question requires no discussion inasmuch as it has been decisively settled by our Supreme Court in a long line of cases. In Railway Passenger & Freight Conductors’ Mut. Aid & Benefit Ass’n v. Tucker, 157 Ill. 194, the court said at pp. 200, 201:

“It is contended by counsel for appellant, that the doctrine of waiver as above stated applies only to insurance companies having a capital stock and insuring the lives of strangers, and that it has no application to mutual benefit societies, or associations established on the mutual principle. Some cases are referred to which seem to sustain the contention of counsel, but this court is committed to the position that mutual benefit associations are subject to the application of the doctrine of waiver. In Metropolitan Accident Ass’n v. Windover, 137 Ill. 417, we held that, where, by the terms of a by-law of a mutual benefit association, failure to pay an assessment within thirty days after notice operated as a forfeiture of membership, such forfeiture might be waived by the association.”

In Dromgold v. Royal Neighbors of America, 261 Ill. 60, it was held on pp. 64, 65:

“It has been held by this court that the doctrine of waiver applies not only to insurance companies having a capital stock, insuring for pecuniary profit, but also to mutual benefit associations. (Metropolitan Accident Ass’n v. Windover, 137 Ill. 417; Railway Conductors’ Benefit Ass’n v. Tucker, 157 id. 194; Cover-dale v. Royal Arcanum, 193 id. 91; Illinois Life Ass’n v. Wells, 200 id. 445.) The nature and objects as well as the organization and government of such associations render the application of general rules of law in most cases the same in mutual benefit associations not organized for pecuniary profit as in insurance societies organized for pecuniary profit. (3 Am. & Eng. Ency. of Law, — 2d ed. — 1044; see, also,.Niblack on Benefit Societies and Accident Ins. — 2d ed. — sec. 3; 1 Bacon on Benefit Societies and Life Ins. — 3d ed.— sec. 23.) No absolute rule can be laid down as to what acts will in all cases amount to a waiver of a forfeiture of membership in a mutual benefit society, but this court held in Railway Conductors’ Benefit Ass’n v. Tucker, supra, on page 201, that conduct on the part of the society which amounts to a recognition of a member’s claim to the continuing- rights of membership will relieve him from the consequences of his default. The receipt of assessments after default in payment is a common form of waiver.’ ”

Considerably more than one-third of defendant’s exhaustive brief is devoted to the proposition that “there can be no reinstatement of a suspended member after death” and a vast number of cases from this and other jurisdictions are cited to support the argument thereon. A careful examination of plaintiff’s declaration and replications fails to reveal any allegation from which the conclusion might be drawn that plaintiff claims that the payment of delinquent assessments after death was effective to bring about the reinstatement of a suspended member and we, therefore, deem it unnecessary to discuss this point.

Defendant urges that “knowledge of'the facts is essential to waiver” and that the acceptance by the financial secretary of the subordinate lodge of delinquent assessments February 3, 1931, two days after the death of the member without knowledge of such death, could not be held to be legally effective as a waiver of the society’s rights to suspend the member, forfeit her membership and terminate defendant’s liability on the insured’s benefit certificate. This is a correct statement of the law as to waiver. In Ferrero v. National Council of Knights & Ladies of Security, 309 Ill. 476, the court enunciated this principle in the following language at p. 481:

“In all cases, however, knowledge of the fact constituting a forfeiture is essential and there is no waiver without such knowledge. A waiver is the intentional relinquishment of a known right, and there must be both knowledge of the existence of the right and the intention to relinquish it. (Perin v. Parker, 126 Ill. 201.)”

Plaintiff does not urge that the mere payment after the death of the insured of her delinquent assessments to the financial secretary of the subordinate council, without knowledge on the part of the officer accepting the payment of such death, constituted waiver but he properly asserts that the acceptance of the delinquent assessments by defendant, even after death, should be considered as evidence tending to prove that defendant continued to recognize Josie Lukes as a member, especially where there is other evidence to show that the society considered the membership in force.

In Illinois Life Ass’n v. Wells, 200 Ill. 445, where after the death of a policyholder a friend inquired at the office of the insurance company as to the status of the policy, without any reference being made to the insured’s death, and was told by the manager and another employee of the insurance company’s local office that there were some unpaid premiums and to be safe he should pay them and was asked if he wanted to pay them, it was said at p. 451;

“This evidence, being accepted as true, shows that at that time the company did not consider the policy as having lapsed, and did not intend to declare a forfeiture for the failure to make the payments when they became due. The witness says that he did not tell either Brown or the manager that Wells was dead, but assumed or understood they knew it. Whether they did or not could make no difference as to the competency of this testimony and its legal effect. It was not offered for the purpose of proving any new contractual relations between the insured and the company, but simply for the purpose of showing that the company did not at that time regard the policy as having been forfeited.”

In Jones v. Supreme Lodge Knights of Honor, 236 Ill. 113, where a check for a delinquent assessment was mailed from a distant city, where the member resided, to the financial recorder of the subordinate lodge in Chicago by a creditor of the deceased member eight days after his death and was received and retained by the recorder without knowledge of such death until some time later when he returned the check, it was held at p. 119:

“The evidence that Sellmeyer sent a check for the February installment after the death of the insured was competent, not for the purpose of proving a new contractual relation between the insured or his beneficiaries and the company, but for the purpose of showing that the company did not at that time regard the policy as having been forfeited. (Illinois Life Ins. Co. v. Wells, 230 Ill. 445.)”

It has repeatedly been held by both the Supreme and Appellate Courts of this State that the acts of a benefit society, after the death of a member, may be received in evidence and considered for the purpose of determining whether, at the time of the death, the society considered the benefit certificate in effect and the membership a continuing one.

It is a fundamental principle of law that courts are always reluctant to enforce forfeitures. They-are not favored and are never enforced cheerfully and the law will decline to enforce them when they are against equity and good conscience. (Knights Templars and Masons Life Indemnity Co. v. Vail, 206 Ill. 404.) Unless circumstances show a clear intention to declare a forfeiture it will not be enforced and courts readily seize hold of any circumstances that indicate an intent to waive. (Railway Passenger $ Freight Conductors’ Benefit Ass’n v. Tucher, supra.)

It is next urged by defendant that no action of an officer or member of a subordinate council can result in a waiver of any rights of the society secured to it by its laws and contract with the holder of its benefit certificate under the following section of its by-laws:

“No officer or membér, or number of officers or members of the Supreme Council, any Advisory Council or of any Subordinate Council, shall have any power to modify or waive any of the Laws of the Association, or any requirements thereof, whether the same be now in force or hereafter enacted, and such laws shall be binding on the Association, and each and every member thereof, and on all beneficiaries of members. Neither shall any knowledge or information obtained by, nor notice to any Subordinate Council, or officer or members thereof, or by or to any other'person, be held or construed to be knowledge or notice to the Supreme Council, or the officers or members thereof, until such information or notice be presented in writing to the Supreme Scribe.
“The receipt and retention of combined monthly assessments or contributions, dues or special assessments, or any or either of them, shall not, in any case, constitute or effect a waiver of any law or laws of the Association, or any defense which might have been availed of or relied upon by the Association had such payment or payments not been received and retained, and in any such case the Association shall only be liable for the amount or amounts of such payment or payments so received and retained.”

This contention of lack of authority on the part of representatives of the society to waive forfeiture provisions of its laws is untenable. In construing a similar by-law in Dromgold v. Royal Neighbors, supra, the Supreme Court said:

“The application for a benefit certificate and the by-laws of the society are to be considered a part of the contract between the society and the member. (Enright v. Knights and Ladies of Security, 253 Ill. 460.) Restrictions upon the power of an agent of an insurance company to waive any of the conditions of the contract or upon the manner of such waiver are themselves conditions of the contract, which may be waived the same as any other condition of the policy. ’ ’

In Zeman v. North American Union, 263 Ill. 304, on p. 312, the court held:

“The law is well settled in this State that the provisions of the by-laws of mutual benefit societies of this character may be waived by the society; that the local lodge or council of such society is the agent of the supreme lodge, and may waive such by-laws by accepting dues and assessments with full knowledge of all the facts constituting a violation of the rules of the order, or by other acts .and conduct of its officers and agents of such a character as to induce a belief on the part of the insured that the society does not intend to exercise its right of forfeiture, but, on the contrary, recognizes the insured as a member of the society in good standing. (Jones v. Knights of Honor, 236 Ill. 113; Grand Lodge A. O. U. W. v. Lachmann, 199 id. 140.) For this purpose knowledge of facts received or communicated to its officers having authority to act in the premises, and whose duty it is to act in the premises, is imputed to the society. (Court of Honor v. Dinger, 221 Ill. 176; Walker v. American Order of Foresters, 162 Ill. App. 30; O’Brien v. Catholic Order of Foresters, 172 id. 638.) ”

Waerness v. Independent Order of Foresters, 244 Ill. App. 211, held at pp. 217, 218:

“The defendant earnestly contends that the local court, and in particular the financial secretary, under the by-laws was wholly without authority to waive any requirement of the by-laws relating to reinstatement. . . . The general rule, however, in this and other States, seems to be that the by-laws of a mutual benefit society, limiting the authority of its local organizations or officers in these respects, are unavailing where such local body or officer has apparent authority. Independent Order of Foresters v. Schweitzer, 171 Ill. 325; Zeman v. North American Union, 263 Ill. 304; Dromgold v. Royal Neighbors of America, 261 Ill. 60.” That the provisions contained in the by-laws, application, benefit certificate or any other portion of the contract of membership in a fraternal benefit insurance society providing for the forfeiture of such membership in certain events may be waived by the society has been settled by a long and uninterrupted line of decisions in this State. In Chicago Life Ins. Co. v. Warner, 80 Ill. 410, pp. 412, 413, the court said:
“It is obvious that the provision in the policy, providing for a forfeiture for a non-payment of the annual premium, was incorporated in the contract for the benefit of the insurance company. The policy did not necessarily become void, if the premium was not paid when due. The company had the undoubted right to waive the forfeiture, if it saw proper, and dispense with a prompt payment of the premium at the time it was due.
“If this had been done by the insurance company in this case, then, notwithstanding the contract declares the policy void if the premium is not paid when due, the company cannot avail of the defense.”

In Railway Passenger & Freight Conductors’ Benefit Ass’n v. Tucker, supra, it was held on page 200:

“Where a life insurance policy provides for a forfeiture for the non-payment of the annual premium on or before a specified time, such provision is for the benefit of the insurance company, and the company has a right to waive the forfeiture and dispense with a prompt payment of the premium at the time when it is due. Unless the circumstances show a clear intention to declare a forfeiture, it will not be enforced. ’ ’ While there is some confusion and conflict among the authorities, the substantial weight of authority in this State supports the position that a fraternal benefit society may be estopped from claiming a forfeiture of membership under its rules, or be held to have waived same because of its custom and established practice of accepting assessments from its members long after the same became delinquent, and long after the policy would otherwise have lapsed under the terms of its contract and laws. In Chicago Life Ins. Co. v. Warner, supra, the earliest case we find in this State on the question, the court held on p. 413:
“If the practice of the company, and its course of dealings with the insured, and others known to the insured, has been such as to induce a belief that so much of the contract as provides for a forfeiture in a certain event will not be insisted on, the company will not be allowed to set up such forfeiture, as against one in whom their conduct has induced such belief. May on Insurance, sec. 361.”

The Tucker case, supra, after stating the rule as just quoted from the Warner case, proceeded at p. 201:

“What acts will in all cases amount to a waiver of a forfeiture of membership in a mutual benefit society cannot be definitely stated, but conduct on the part of the society, which amounts to a recognition of a member’s claim to the continuing rights of membership, will relieve him from the consequences of his default. The receipt of assessments after default in payment is a common form of waiver. The question of waiver is in most cases a question of fact for the jury. (16 Am. & Eng. Ency. of Law, page 83.) . . . Where, out of sixty-four payments made by the assured, sixty-three had been made after the time limited by the by-laws had expired, and no conditions were insisted upon for re-instatement, it was held, that such a course of conduct of the company estopped it from insisting upon a forfeiture for non-payment within such time without giving personal notice, that thereafter prompt payment would be required. (Stylow v. Wisconsin Odd Fellows Mut. Life Ins. Co., 69 Wis. 224.)”

The following language was used in Illinois Life Ass’n v. Wells, supra, on pp. 454, 455:

“The position of counsel is that, ‘even though the time of the payment of' the premium was waived, the failure to pay or tender the amount due before the death of the insured is fatal to a recovery. ’ If this position is tenable, then a general waiver of the terms and conditions of a policy of life insurance would be of little avail to the insured. In other words, if in every case of waiver the insured is bound to make payment before the loss occurs, as argued by counsel, the question of waiver would seldom be one of importance in a suit upon the policy. If payment was actually made, even though not according to the terms of the policy, the company could certainly not thereafter insist upon a forfeiture for a failure to pay promptly.”

The rule that an insurance company or fraternal benefit society will be estopped from insisting on the forfeiture of a policy or benefit certificate, where its established practice or course of dealing induced the policy holder or member to believe it would not so insist, announced in the Warner case, supra, and followed in the Tucker, Wells, Jones, Dromgold and many other cases of the Supreme and Appellate Courts of this State since its enunciation, was adhered to in the case of Baxter v. Metropolitan Life Ins. Co., 318 Ill. 369, 372, where the following language was used by the court:

“The Appellate Court found that the right of the insurer to insist on the lapse of the policy for failure to pay the premium within the time required had been waived by its conduct. What that conduct was is a question of fact and is not open to review here, but it must be taken as established that the plaintiff in error had at previous times accepted payments on this policy after the thirty-one days of grace had expired. Waiver by an insurer results when it by an act, statement or course of conduct toward the assured recognizes the policy as existing though the time for payment of the premium has expired. Forfeiture of life insurance policies is not favored, and unless the circumstances show a clear intention to claim a forfeiture for non-payment of the premium such forfeiture will not be enforced. If the conduct of the insurer is such as to induce the assured to believe that a forfeiture will not be insisted upon, the insurer will be held to be estopped from taking advantage of such forfeiture. Bennett v. Union Central Life Ins. Co., 203 Ill. 439; Aetna Life Ins. Co. v. Sanford, 200 id. 126; Illinois Life Ass’n v. Wells, 200 id. 445; Manufacturers and Merchants Ins. Co. v. Armstrong, 145 id. 469; Chicago Life Ins. Co. v. Warner, 80 id. 410.”

In our opinion the cases cited clearly and conclusively establish the law of this State applicable to the determination of the questions presented by this appeal. Defendant, however, strenuously insists that to sustain plaintiff’s contention that the association ..waived its right to a forfeiture under its contract with Josie Lukes and is estopped by its course of dealing with her, and other members known to her, from asserting or insisting upon such forfeiture, we must overrule the following decisions: Dillon v. National Council of Knights & Ladies of Security, 148 Ill. App. 121, 132; Dillon v. National Council of Knights & Ladies of Security, 244 Ill. 202, 206; National Council of Knights & Ladies of Security v. Burch, 126 Ill. App. 15, 18; Catholic Order of Foresters v. Lynch, 126 Ill. App. 439, 458; Neenan v. National Council of Knights & Ladies of Security, 188 Ill. App. 490, 493; Trafton v. National Council of Knights & Ladies of Security, 198 Ill. App. 347, 349; Kraus v. National Council of Knights & Ladies of Security, 198 Ill. App. 345; Soukup v. Modern Woodmen of America, 210 Ill. App. 320; Busta v. Court of Honor, 172 Ill. App. 71, 75; Glaspy v. United Brotherhood, 163 Ill. App. 78, 80. Neither similar facts nor the precise questions of law involved in the case at bar were present in the Burch, Neenan, Trafton, Kraus, Soukup, Busta and Glaspy cases, enumerated above, and while it is impossible to analyze them here without unduly lengthening this opinion, they are all readily distinguishable from this cause.

In Dillon v. National Council Knights & Ladies of Security, 148 Ill. App. 121, supra, the court apparently overlooked the leading Illinois cases relating to the issues involved and cited as authority for its conclusions Illinois cases that were clearly inapplicable or cases of other jurisdictions that held directly contrary to the law of this State.

By petition for rehearing the court’s attention was directed to Jones v. Supreme Lodge Knights of Honor, 236 Ill. 113, supra, which had recently been decided by the Supreme Court and had not been considered on the determination of the appeal. The practice of the officers of the local lodges in accepting assessments after they were in default was admittedly similar in the Jones and Dillon cases, but the court refused to be influenced or controlled by the Jones case, supra, declaring in a supplementary opinion that important and vital differences (which we fail to perceive) between the provisions of the benefit certificates and the bylaws in the two eases distinguished them, and that the conclusions reached by the Supreme Court in the Jones case could have no application.

The following language, which we deem particularly apt and pertinent to the facts and questions of law as they appeared in the Dillon case, was used by the Supreme Court in the Jones case, 236 Ill. 113, supra, on pp. 117, 118:

“We think there is sufficient evidence in the record to show that the custom, usage and practice of receiving and crediting assessments by the subordinate lodge was sufficient to warrant the jury in finding that prompt payment and the right of forfeiture were waived by appellant, if appellant could be bound by the acts of the officials of subordinate lodges. Whatever the holding in other jurisdictions has been, it is clear that under the decisions in this State the subordinate lodge or council of a fraternal benefit society is the agent of the supreme lodge or council, and that such subordinate lodge may waive forfeiture or suspension upon failure to pay assessments and dues promptly.”

In Dillon v. Knights & Ladies of Security, 244 Ill. 202, supra, the court, in our opinion, did not adhere to the law governing benefit certificates in fraternal organizations as held in a long line of Illinois cases. In distinguishing the Jones case we believe the court inadvertently followed the conclusion reached by the Appellate Court that the by-laws of the two associations were so essentially different that none of the conclusions reached in the Jones case was applicable. Where the facts were so similar and substantially the same questions of law were involved, it is difficult to reconcile the prior opinion in the Jones case, and the subsequent opinion in the Dromgold case, supra, with the conclusions reached in the opinion written by the same learned justice in the Dillon case.

Defendant refers to Catholic Order of Foresters v. Lynch, 126 Ill. App. 439, supra, where the facts were very similar to the facts here. In that case the court reached a conclusion directly contrary to that reached by us in this case, but it is sufficient to state that in so doing it failed to be guided by the substantial weight of authority of this State and relied on authorities of other States where different rules of law prevail.

Under the pleadings it is admitted that during the period of more than 12 years that Josie Lukes was a member of defendant association, notwithstanding its self executing laws on suspension of members who failed to pay assessments when due, and notwithstanding its laws prescribing definite methods for the reinstatement of suspended members, and notwithstanding its laws declaring the forfeiture of all rights under their benefit certificates of members who had suffered suspension and failed to reinstate themselves, and in direct contravention of those laws, defendant, customarily, and as a matter of established practice, received and accepted from the insured, and from other members known to her, assessments that were more than two months in arrears. The allegation of the replications (more”than two months in arrears) is sufficiently broad to cover delinquencies of three, four, five or six months, or even a year or more.

By reason of its course of dealings with her Josie Lukes was obviously lulled into a feeling of security and the belief that delay in the payment of her assessments would not result in the forfeiture of the rights of herself and her beneficiary under her benefit certificate and thus preclude plaintiff from realizing the protection the insurance was meant to afford.

We are constrained to hold that her benefit certificate had not lapsed at the time of insured’s death, and that the acceptance of her delinquent assessments after her death was significant only as indicating that the society itself did not consider her certificate as having lapsed, but recognized her continuing rights of membership.

Our conclusion is not predicated upon acceptance in isolated instances of past due assessments from the member through the ignorance, negligence or even collusion of an officer of a local council, but upon the established practice of the association itself of accepting such assessments over a period of years. Josie Lukes was fully paid up until September 1, 1930. All delinquent assessments paid by her prior to that date were necessarily received and accepted by the supreme council of the society and credited to her. Therefore, defendant was fully cognizant of the conduct of its subordinate officers. In accepting from her, as is admitted, over a period of years, assessments that were in default for varying terms of more than two months in violation of its own laws, it waived its provisions as to suspension, reinstatement and forfeiture and continued to recognize her as a member, notwithstanding nonpayment of her assessments when due, and defendant cannot be heard to say upon her death that her benefit certificate had been forfeited.

A fraternal benefit society will not be permitted to treat a benefit certificate as alive and in full force, and accept the member’s money over a period of years in violation of suspension and forfeiture provisions of its contract until death occurs, and then for the first time seek to void the certificate and escape its liability. Neither will such an association be permitted to insist on the forfeiture of a benefit certificate issued by it for nonpayment of assessments when due, where its course of dealings with the member has led her to believe that the provisions for forfeiture would not be relied upon.

Counsel for defendant calls upon this court to protect what they seem to consider the almost sacred rights and privileges of fraternal benefit societies. We are invoked to hold that the doctrine of waiver does not apply to such associations in spite of the fact that the clearly established law of this State holds to the contrary. Then in an apparent spirit of concession we are asked, in the event that we do not feel impelled to disregard the law on the subject of waiver or estoppel as applicable to fraternal insurance organizations, that we do not by the determination of this appeal, extend such law.

We fully appreciate the nature and character of fraternal benefit associations and the purpose they serve in the community and the nation, but we are also mindful of the rights of the members of such organizations and their beneficiaries for whom the benefits and protection of the insurance was intended. As a matter of right, justice and good morals, courts at all times should and do protect such beneficiaries against forfeitures unjustified under the facts and the law.

It is.a mattqr of common knowledge that, even prior to but especially since the advent of the depression, fraternal insurance associations, with few exceptions, have carried members for long periods without payment of their assessments in disregard and in violation of their laws and regulations, in the hope that they would sooner or later pay, and have accepted from them the payment of long overdue assessments without insistence on suspension, reinstatement or forfeiture of their rights and benefits. That such societies did not care to lose a large portion of their membership during these trying times, through lapsed benefit certificates, was obviously the reason for their failure to insist on strict compliance with their contracts and laws.

The blame for this condition of affairs cannot justly be placed on subordinate councils or their officers, but squarely attaches to the association itself. It is within its power to change the situation almost over night if it cares to. All that is necessary is the discontinuance of the practice and custom of receiving delinquent assessments in violation of its rules and regulations, the strict observance of its own laws and notice to its members that prompt payment of assessments as provided by their contracts of insurance and the laws of the society will be insisted upon.

For the reasons indicated the judgment of the superior court is affirmed.

Affirmed.

Gridley and Scanlan, JJ., concur.


source: Caselaw Access Project

author: Mr. Presiding Justice Sullivan

license: Public Domain

text:
    In re Estate of Eleanor E. Brunt, Deceased. Harris Trust and Savings Bank, as Executor of the Last Will and Testament of Eleanor E. Brunt, Deceased, Appellee, v. Helen Spurrier Allen, Appellant.
    Gen. No. 36,773.

      Opinion filed March 6, 1934.
    Heard in the second division of this court for the first district at the June term, 1933.
    Charles E. McGuire, for appellant.
    Chapman & Cutler, for appellee; Richard J. Frankenstein and Charles M. Thomson, of counsel.
   Mr. Presiding Justice Sullivan

delivered the opinion of the court.

Harris Trust & Savings Bank (hereinafter for convenience referred to as. the executor) as executor of the estate of Eleanor E. Brunt, deceased, filed its final account in the probate court. Helen Spurrier Allen (hereinafter referred to as objector) filed objections thereto based on the manner of the distribution of the estate among the several legatees named in the will. The probate court sustained the objections and ordered the executor to revise its final account. The executor appealed to the circuit court, where the cause was heard de novo and an order was entered by the court reversing the order of the probate court and confirming and approving the final account of the executor. This appeal seeks to reverse that order.

The testatrix, Eleanor E. Brunt, executed her last will and testament February 3, 1928. The paragraphs in the will pertinent to this appeal are those designated as articles 4, 7, 12 and 17.

Article 4 contains a bequest to Harris Trust & Savings Bank, as trustee, of “the sum of $23,000 to have and to hold the same upon the following trusts . . ., ” which trusts are thereinafter set forth.

Article 7 contains a bequest to Harris Trust & Savings Bank, as trustee, of “the sum of $20,000 to have and to hold the same upon the following trusts . . .,” which trusts are thereinafter set out. The objector, Helen Spurrier Allen, is the chief beneficiary of the bequest set out in this article.

Article 12 reads as follows:

“I direct that the legacies in articles 4 and 7, respectively, shall have precedence over all other legacies and bequests in this will provided for and that the trust funds created in the said articles shall he established in full prior to the payment of any other legacies or bequests. I do further direct that the legacies in articles 4 and <9, respectively, of this will provided for shall be paid by the executor hereof in cash or in high grade securities at their fair market value. All other legacies in this will provided for shall be paid by the executor hereof in cash or in bonds constituting a part of my estate at the time of my death, to he delivered at their face value, as the executor hereof may deem proper and for the best interests of my residuary estate.” (Italics ours.)
The final account of Harris Trust & Savings Bank, as executor of this estate, shows among other things the following:
Article 4. Payment of $23,000 “in cash or securities at their fair market value” to Harris Trust & Savings Bank, trustee:
Ten shares American Telephone and Telegraph Company, common stock at $166.75.$ 1,667.50
Cash.................................... 21,332.50'
23,000.00
Less Illinois Inheritance Tax.............. 1,273.70
$21,726.30
Article 7. Payment of $20,000 “bonds at par value” and cash to Harris Trust & Savings Bank, as trustee: Divers and sundry1 bonds set out in the report specifically, constituting a part of the estate at the time of the death of deceased,
all at par value........................$19,000.00
Cash.................................... 1,000.00
20,000.00
Less Illinois Inheritance Tax.............. 814.16
$19,185.84

In addition to those provided under articles 4 and 7, by the terms of the will the testatrix left 13 other separate legacies or bequests in amounts varying from $150 to $10,000,' aggregating $41,150. The payment of $20,000 cash or its equivalent to the legacy created under article 7 would have virtually exhausted the estate.

The objections of Mrs. Alien as beneficiary of the trust set up under the provisions of article 7 were the following: (1) That the account did not carry out the terms of the will; (2) that the account did not contemplate payment of the proper legacy due to or for the use of the objector in accordance with the terms of the will; and (3) that, although the will specified that payment of the legacy in trust for the objector shall have precedence over all other legacies, and shall be estáblished in full prior to the payment of any other legacies or bequests, except the legacy or bequest provided for in article 4 of the will, the final account presumes to cause said legacy to abate and to pay on other legacies and bequests a part of the assets of said estate, although such other legacies and bequests are specifically declared to be subordinate to the first and full payment of the legacy due under the will to the bank, as trustee, for the use of the objector.

Objector prayed that an order be entered directing the executor to revise and reform its account “in accordance with and for the purpose of carrying out the terms and intention of the last will and testament of Eleanor E. Brunt, deceased. ’ ’

The executor filed an answer to the objections of Mrs. Allen, in which it denied (1) that the account as filed did not carry out the terms of the will; (2) denied that the account did not contemplate the payment of the proper legacy for the use of the objector under the terms of the will; and (3) denied the allegations contained in par. 3 of the objections and alleged that the legacy in trust for the benefit' of the objector under article 7 has been paid in the manner contemplated by the will and has been given the preference provided for therein and prayed that an order be entered approving the final account.

Objector contends that the executor in establishing the trust fund for the legacy created under article 7, by allocating to it $19,000 par value bonds (market value $7,200) and $1,000 cash, acted contrary to the clear intention of the testatrix as expressed in the first sentence of article 12, which directed that “legacies in articles 4 and 7 . . . shall have precedence over all other legacies and bequests . . . and that the trust funds created in siich articles shall be established in full prior to the payment of any other legacies or bequests”; that this preference cannot be destroyed by any action of the executor, the effect of which would be to reduce the value of her legacy under article 7 from $20,000 to $8,200; that there were sufficient funds in the estate to pay her legacy the full amount of $20,000 cash or its equivalent; and that it should have been so paid, notwithstanding that such payment by the executor would have left practically nothing to satisfy the 13 other legacies.

The executor’s theory is that the last will and testament of the deceased did not require the executor to pay the legacy bequeathed to objector under article 7 of the will $20,000 cash or its equivalent; that the report and account is in all respects in fulfillment of the terms of the will of the deceased in the matter of the establishment and payment of the legacy provided in the will in favor of objector; that the only specific direction under the terms of the will to pay any of the legacies in cash or its equivalent was that contained in the second sentence of article 12, which stated': “I do further direct that the legacies in articles 4 and 8 (article 8 was eliminated by a codicil) . . . shall be paid by the executor ... in cash or in high grade securities at their fair market value”; and that in the exercise of a proper and reasonable discretion it established the trust fund created under article 7, pursuant to the intention of the testatrix as indicated in the third sentence of article 12, which directed: “All other legacies . . . shall be paid ... in cash or in bonds constituting a part of my estate at the time of my death, to be delivered at their face value as the executor hereof may deem proper. . . .”

The only witness in this proceeding in the circuit court was Chas. J. Eoubik, Jr., who testified that he was assistant secretary of the Harris Trust & Savings Bank; that-the administration of the estate was under his supervision; that the trust under article 4 was established by allocating to it 10 shares of American Telephone & Telegraph Company stock at thé market value of $1,667.50 and cash in the amount of $21,332.50, making a total of $23,000; that the trust under article 7 was next established by the allocation to it of 19 bonds of $1,000 par value each, and cash in the amount of $1,000; that the reason why the executor established the trust under article 7 by allocating bonds at par rather than securities at their market value was that article 12 of the will gave the executor the right to do so, and because its officers believed it to be the proper thing to do in order to spread out what property was left as far as they could make it go over the remaining legacies; and that by establishing the trust under article 7, with the appropriation of $19,000 in bonds at their par value and $1,000 in cash, they were then able to pay by the sale of the bonds that were left a trifle over 35 cents on the dollar to the remaining legatees.

The determination of the questions presented on this appeal must necessarily be controlled almost entirely by the interpretation given to article 12 of the will. That article must be construed in the light of recognized and well defined principles of law. The intent of the testator should control. Such intent should be ascertained, if possible, from the four corners of the will. All words in the will should be given their ordinary meaning in the absence of something specifically indicating the contrary. All. provisions of the will should be given effect, if possible, and in determining the intention of the testatrix the question presented is not what the deceased intended to say, but rather what was the intention of the deceased as reflected by what she did say. (Hawthorne v. Ulrich, 207 Ill. 430, 434; In re Mizener’s Estate, 262 Pa. 62, 105 Atl. 46.)

The first sentence of article 12 unquestionably accorded preference to the legacies in articles 4 and 7, to the extent of the specific direction that they be established in full prior to payment of any other legacies or bequests. Up to this point articles 4 and 7 were on a parity, and if the testatrix had stopped with this sentence it would have been the executor’s duty to pay both legacies in full in cash. However, she did not stop there. Although she had coupled articles 4 and 7 in the first sentence of article 12, in the following sentence she separated them, specifically directing that the legacy under article 4 be paid in cash or its equivalent. It is futile to argue that the testatrix clearly intended, by reason of the preference expressed in the first sentence, that the legacy provided for in article 7 should also be paid in full in cash or its equivalent the same as the legacy under article 4, and exactly as if it had been included in the second sentence with article 4. It appears to us that the testatrix deliberately and intentionally differentiated and distinguished between them. However, if testatrix’s intention as to the manner of payment or establishment of objector’s legacy had not been expressed beyond the second sentence of article 12, and even though article 7 was not included in that sentence, still she would obviously have been entitled to the payment of her legacy in cash. But testatrix did go further. After singling out the legacy under article 4 and specifically directing that it be paid in cash or its equivalent, she then directed in the third sentence of article 12 that “all other legacies” shall be paid by the executor “in cash or in bonds constituting a part of my estate at the time of my death, to be delivered at their face value as the executor hereof may deem proper and for the best interests of my residuary estate.” There was no residuary estate because of depreciation in the value of the securities.

It must be presumed that testatrix, a woman of considerable property consisting principally of stocks and bonds, well knew the meaning of “market value” and “face value” when she used those terms in her will.

The preference specified in the first sentence of article 12 has been given effect by the full establishment (payment) of both the article 4 and the article 7 legacies, in manner and kind precisely as directed and authorized under the second and third sentences of article 12, prior to the payment of any other legacies or bequests.

Under the will the executor was allowed no discretion as to article 4, but was specifically directed to establish the legacy created thereunder in cash or its equivalent, which it did. After the establishment of that legacy the executor had in its possession assets consisting of cash and securities of a total cash value of $22,705. It was confronted with the proposition of establishing the $20,000 legacy under article 7 and paying 13 other legacies aggregating $41,150. It is readily apparent that if the legacy under article 7 were established in full in cash or its equivalent, the assets of the estate would have been almost depleted, leaving but $2,705 for distribution to the 13 other legatees.

A few of the beneficiaries under the various articles of the will and codicil were close friends or servants of the deceased, but by far the larger number, and those to whom the bulk of the estate was bequeathed, were relatives in whom the testatrix by the terms of the will evinced a tender and devoted interest. An inspection of the 18 articles of her original will, and the five articles of the codicil, executed February 18, 1930, reveals the care and consideration she bestowed upon the general plan of her benefactions.

The executor is manifestly right in its assertion that, except as to the legacy provided under article 4, it was clothed with a broad and reasonable discretion to make a fair and just distribution of the assets remaining in the estate among all the other legatees.. As heretofore noted it recognized its duty to grant priority to the legacy under article 7, and established it in full. It was apportioned $19,000 par value bonds and $1,000 in cash. In our opinion the executor was justified in this allocation, not only under the third sentence of article 12, which granted it discretion to pay all legacies except that-created under article 4 in cash or in bonds that were part of the testatrix’s estate at the time of her death at their face value as it “may deem proper,” but also under article 17 of her will, which provides:

“Except as hereinabove otherwise expressly provided, the Trustee hereunder and the Executor hereof are hereby, respectively, authorized to pay and satisfy the bequests and legacies in this Will provided for, and to make provision and distribution of my residuary estate and of the several trust funds hereinabove created, in securities, property, and/or cash, and in such proportions thereof as the Executor or the Trustee, as the case may be, shall determine to be most equitable, and the value which either the Trustee or the Executor shall place on any property constituting any part of my estate or any of the said trust funds, shall be final and conclusive upon that subject.”

To put upon this will the construction which objector asks is to disregard entirely testatrix’s general scheme of bequests, as well as the plain intent of the language used by her in articles 12" and 17, empowering the executor to use a sound and proper discretion in the administration of the estate and the distribution of its assets, except as specifically directed concerning artide 4. The executor owed a duty to every beneficiary of a legacy or bequest under the will, and we think that it fully recognized its responsibility and discharged its obligation by its method and-manner of distribution. By establishing objector’s legacy in full, as it did, it was enabled to pay all of the other legacies and bequests under the will to the extent of about 35 per cent. It sufficiently complied with the directions of testatrix in the first sentence of article 12, and at the same time carried out her intention as expressed in plain language in the last sentence of article 12, and in article 17. If any other course had been followed the result would have been directly contrary to the plain provisions written into her will by the testatrix.

If meaning is given to every word and clause of the will, considered in the light of the general purpose and intention of the testatrix as reflected throughout the will, the conclusion is irresistible that her intention was effectuated by the method of distribution adopted by the executor. It is obvious, therefore, that not only has the executor fairly interpreted the intention of the testatrix, but it has strictly complied with all of her directions and exercised the discretion in the distribution of the assets of the estate that it was contemplated by her that it should.

Objector cites Wood v. Wood, 276 Ill. 164, as sustaining her contentions, but we believe that the contrary is true and that our interpretation of the will is supported by the following language appearing on pp. 170 and 171 of that opinion:

“A construction which arrives at a result . . . inconsistent with the general scheme- of the testator for the disposition of his property will not be adopted unless the language used imperatively requires it and can be given no' other reasonable construction. ’ ’

Some other questions were raised by counsel in their argument, most of which, however, are practically disposed of by what we have already said. As to the points to which no reference has been made, we need only say that they have not escaped our attention but on full consideration we do not find them of sufficient importance to call for special discussion.

We are of the opinion that the record is free from material error, and the order of the circuit court confirming and approving the executor’s final account is affirmed.

Affirmed.

Gridley and Scanlan, JJ., concur.


text:
    Alan D. Burnet, Appellee, v. Simeon B. Chapin et al., Defendants. Ira J. Couch, Impleaded, etc., Appellant.
    Gen. No. 36,792.

      Opinion filed March 6, 1934.
    Heard in the second division of this court for the first district at the June term, 1933.
    Cameron & Heath, for appellant.
    Charles E. Gruenberg, for appellee.
   Mr. Presiding Justice Sullivan

delivered the opinion of the court.

By this appeal defendant, Ira J. Couch, impleaded with other members of a copartnership doing business under the name of S. B. Chapin & Co., seeks to reverse a judgment for $1,300 rendered against him in an action tried by the court without a jury, based on the disaffirmance of a contract made by a minor.

Plaintiff’s statement of claim filed October 31, 1932, alleged he was bom August 5, 1911; that on or about July 16, 1931, he entered into a contract to purchase and did purchase from defendant’s company 30 shares of Insull Utilities Investments, Inc., paying therefor $875; that again on or about October 1, 1931, he purchased from Chapin & Co. 35 shares of the same stock, paying therefor $425; that at the time of the respective stock purchases he was a minor; that October 6, 1932, after attaining his majority, he disaffirmed his contract for the purchase of the stock, tendered and offered to return same and demanded the return of $1,300 paid by him in consummating the purchase of the stock; and that the company refused to accept the stock and return his money.

Defendant’s affidavit of merits, after admitting the truth of the above allegations except as to plaintiff’s age, and demanding strict proof of that, asserted that in July, 1931, when plaintiff requested the company to make the first purchase of stock for him, he falsely represented to it that he was not a minor but over 22 years of age; and that relying upon such representation, and believing it to be true, defendant’s firm accepted plaintiff’s account, agreed to and did purchase the stock for him.

The salient, undisputed facts are that plaintiff first went to the office of S. B. Ghapin & Co., stockbrokers in Chicago, July 13, 1931; that he paid $1,000 and requested that 30 shares of Insull Utilities Investments, Inc., be purchased for his account; that the purchase was made for $875, and $125, the balance of his deposit, was returned to him and the stock certificate delivered shortly thereafter; that September 21, 1931, plaintiff deposited with defendant’s firm $200 and instructed it to purchase 35 additional shares at $12 a share, which cost with commission $425; that October 3, 1931, he paid $225 completing the payment for the additional shares; and that-October 10,1931, he received the stock certificate.

' The evidence discloses that upon plaintiff’s first visit to the office of Chapin &i Co., when he opened his account, he was asked his age by the representative of the company, with whom he dealt and answered that he was 22 years of age. Plaintiff did not deny on the trial that he misrepresented his age and the court, in a special finding of fact, held that at the time plaintiff opened his account with defendant’s firm he represented that he was not a minor but 22 years of age.

Defendant contends (1) that the misrepresentation as to his age made by plaintiff, in procuring the purchases of stock to be made for him by defendant’s firm, constitutes a defense to a suit for recovery of the purchase price brought by plaintiff after attaining his majority; and (2) that, in any event, plaintiff by delaying an unreasonably long time, under all the circumstances, in disaffirming his contract after becoming of age is barred from recovery.

Plaintiff’s theory is that the alleged misrepresentation as to his age is not a defense where he has not received anything he refuses or does not offer to return; that he disaffirmed the contract and offered to return the stock within a reasonable time after attaining his majority; that a misrepresentation, in order to permit recoupment on the part of defendant, must be a false statement of a material fact known or believed by the party making it to be untrue, and made by him for the purpose of inducing action by the other party who believes the representation to be true and relies upon it to his injury; and that defendant neither alleged in his affidavit of merits nor proved these necessary elements of misrepresentation.

In Hunter v. Egolf Motor Co., 268 Ill. App. 1, where an automobile purchased on a conditional sales contract by a minor representing himself as an adult was turned back to the vendor for repairs, after having been used by the minor for about a month and a half, and then held by the vendor because of a controversy as to the liability for the repair bill, and where the vendor asserted that he should be allowed recoupment to the extent of the depreciation in the value of the car, in an action by the minor to recover upon his disaffirmance of the contract the amount theretofore paid by him to the vendor, the court said at pp. 4, 5 and 6:

“The principal question arising on this record is: Can a minor falsely represent his age to a company for the purpose of making a contract of purchase and procure property under such contract and then be entitled to rescind the contract and recover the amount he has paid on the obligation? Similar questions have been before the courts of this country on various occasions and the decisions are not wholly uniform, yet the weight of modern authority is to treat all contracts with infants, except for necessaries, as voidable at the instance of the infant.
“The general rule applicable to contracts, other than for necessaries, is that an infant is not liable thereon but is liable for his torts. In holding an infant liable for his torts the law is solicitous not to impair the immunity given him against liability upon his contracts. It has been said that the only satisfactory test is, Can an infant be liable for a tort without directly or indirectly enforcing his promise under a contract?
“In Hauser v. Marmon Chicago Co., 208 Ill. App. 171, the court, in a memorandum opinion, held that ‘Minors, upon restoration of an automobile to the seller, although it has been used and has deteriorated in value, are entitled to rescind the contract of sale and recover back that part of the purchase price which has been paid.
“The rule as announced in Ashlock v. Vivell, 29 Ill. App. 388, would seem to be that if a minor falsely represents his age to a person to buy something with the intention of never paying for it, then such act would be a tort and in such case an infant would not be relieved from the damage caused the other party by his tort, but if a minor falsely represents his age to another for the purpose of making a purchase with the intention of carrying out his contract, then his failure to carry out the contract is a breach of contract and not a tort and he cannot be held liable for the damage that he has caused. The court also, in its opinion in the same case, upon page 392, quoted with approval Cooley on Torts as follows: ‘There are some cases, however, in which an infant cannot be held liable as for a tort, although on the same state of facts a person of full age and legal capacity might be. The distinction is this: If the wrong grows out of contract relations, and the real injury consists in the nonperformance of a contract into which the party wronged has entered with an infant, the law will not permit the former to enforce the contract indirectly, by counting on the infant’s neglect to perform it or omission of duty under it as a tort. The reason is obvious. To permit this to be done would deprive the infant of that shield of protection which, in matters of contract, the law has wisely placed before him.’'
“The court also quoted Chancellor Kent (2 Kent’s Com. page 277, 10th Ed.) as follows: ‘The fraudulent act, to charge him, must be wholly tortious, and a matter arising ex contractu, though infected with fraud, cannot be changed into a tort in order to charge the infant in trover, or case, by a change in the form of the action. . . . ’
“The exercise of a minor’s right to disaffirm his contract may operate injuriously and sometimes unjustly against the other party, but the right exists for the protection of the infant against his own improvidence and may be exercised entirely in his discretion. (Wuller v. Chuse Grocery Co., 241 Ill. 398.)

The evidence in that case disclosed that the minor, notwithstanding the misrepresentation as to his age, entered into the contract to purchase the car in good faith and with no intention to perpetrate a fraud. He turned in another car on his purchase, made a substantial cash payment and his first instalment payment. It was because of what he considered the failure of the vendor to make good on its guarantee of the car that he repudiated his contract on the ground of his infancy. At the time of the disaffirmance the seller had the new car, which had been used less than two months, the minor’s old car and his cash payments. In view of the facts and equities in that case, in our opinion, the court was clearly justified in affirming the judgment in favor of the minor.

As was stated in the Hunter case, supra, the weight of modern authority confirms the right of a party to a contract, entered into during his minority, to disaffirm his voidable contract either before or after he becomes of age, especially if upon disaffirmance he tenders to the other party the benefit he has received under it, even though the contract was induced by his representation that he was an adult.

There is respectable authority that holds that when a youth who has the appearance of maturity falsely represents himself as an adult, and the other party is led to believe such infant is an adult and makes a contract with him, the benefit of which he obtains and retains, he is estopped both by law and equity to plead the privilege of infancy to void the contract. (LaRosa v. Nichols, 92 N. J. L. 375, 105 Atl. 201, 6 A. L. R. 412; Pinnacle Motor Co. v. Daugherty, 231 Ky. 626; Tuck v. Payne, 159 Tenn. 192; Watters v. Arrington, 39 Ga. App. 275, 146 S. E. 773.)

It has also been held under the same circumstances that, while an infant is not estopped to set up his infancy because of false representations as to his age, natural justice will not permit him to recover money paid for the property without compelling him to account for the injury his deceit has inflicted on the other person. (Myers v. Hurley Motor Co., 273 U. S. 18, 47 Sup. Ct. 277, 50 A. L. E. 1181.)

It has likewise been held that an infant who fraudulently deceives a vendor as to his age, must permit the vendor to recoup any damage caused by deterioration or depreciation due to the use of the property purchased when he seeks to rescind his voidable contract and recover payments made thereunder. (Steigerwalt v. Woodhead Co., 186 Minn. 558.)

However, in the instant case,'which involves an outright purchase of speculative stock for cash, the only evidence of fraud on which defendant relies to preclude plaintiff’s recovery is his bare statement that he was 22 years of age at the time of the transaction when, in fact, he was just under 20. There is no evidence as to whether his appearance was mature or immature. Prior to acceptance of his account, in addition to his name and address, he was asked for a banking reference and his business and age. His answers indicating that he was a student at Armour Institute College and giving his banking reference were written on the 1 ‘ customer’s” or reference card, but his age was not noted although there was a space on the card for it. That defendant’s firm did not rely entirely on plaintiff’s statements is evidenced by the testimony of its witness, Costin, who. stated that in entering the information from the “customer’s” card-she wrote into her record “investigated,” in addition to the information disclosed on the card. The record does not reveal the character of defendant’s investigation, but it appears to us that plaintiff’s correct age could have been easily ascertained by a telephone call to Armour Institute College or to Lake View Trust & Savings Bank, which he gave as reference, if sufficient and proper interest had been manifested in his age by the company. The purchase of speculative stock by a minor was an improvident contract for him and in this character of transaction the law is well settled that parties dealing with him do so at their peril. It was the duty of defendant’s firm to make at least a reasonable effort to ascertain whether or not a person of doubtful age was of legal age before it dealt with him.

Neither the evidence nor any reasonable inference that may be drawn therefrom proves or even tends to prove that plaintiff, when he misstated his age, did so with any fraudulent intent. It indicates rather that he was impelled by a craving to speculate in stock and in no other way could he indulge thát craving than by representing that he was an adult. If this original intention had been fraudulent, is it not reasonable to suppose that in September, 1931, after the stock originally purchased by him had dropped about 17 points, he would have then repudiated his contract and demanded the return of his money rather than make a purchase of additional stock? Upon attaining his majority he tendered and offered to return the stock. He retained no benefit that he received from defendant. No case has been cited and we have been unable, after diligent search, to find one that holds that under the facts and circumstances as they appear in this case plaintiff is estopped from disaffirming his contract and recovering the money paid on same.

If the law of this State permitted recoupment under the circumstances disclosed here, still it would be incumbent on defendant to show that the representation made by plaintiff was knowingly false; that it was made with the intent to deceive defendant; that it was believed and relied upon by him and that he was damaged thereby. Assuming that all the other elements of fraud have been sufficiently proven there is not a scintilla of evidence in this record that defendant has suffered any damage by the disaffirmance of the contract. There is not a particle of evidence to indicate the price or value of the stock on the date of the disaffirmance or at the time of the trial. The record is absolutely silent on the question as to whether the stock, at the time of the trial or the disaffirmance of the contract, had the same value that it had when purchased, whether it had a greater or lesser value or was valueless. Some definite actual damage growing out of the same transaction must be shown to afford a basis for recoupment.

It is true that counsel for defendant calls on this court to take judicial notice of the depression. This we have done in other causes and we do in this, but neither judicial notice of the depression nor defendant’s intimation that the stock in question has depreciated in value can be held to be a legal substitute for proof of actual damage suffered by reason of depreciation in the price or value of a particular stock. Thus it clearly appears there was no evidence to justify any recoupment in this cause.

In answer to defendant’s contention that disaffirmance of the infant’s contract within less than two months after he became of age constituted an unreasonable delay, it is sufficient to state that a careful examination of many authorities confirms our conclusion that the time within which the contract was rescinded was manifestly reasonable.

For the reasons indicated the judgment of the municipal court is affirmed.

Affirmed.

Gridley and Scanlan, JJ., concur.


text:
    Simon Horvitz (Substituted as Complainant for Herbert Levy), Appellee, v. Harry Leibowitz et al., Defendants. Appeal of Stover Company, Inc., Intervening Petitioner, Appellant.
    Gen. No. 36,804.
    Opinion filed March 6, 1934.
    Heard in the second division of this court for the first district at the June term, 1933.
    Daniel D. Kaufman and Taylor, Miller, Busch & Boyden, for appellant; Francis X. Busch, William Klevs and Stephen A. Mitchell, of counsel.
    Myer N. Rosengard, for appellee; Joseph Edidin and Marvin Getz, of counsel.
   Mr. Presiding Justice Sullivan

delivered the opinion of the court.

Simon Horvitz recovered a deficiency judgment for $1,631.76 against Harry Leibowitz and others (mortgagors) under a decree of the circuit court confirming the report of the master in chancery of the sale of property involved in an original foreclosure proceeding. David Horwich was appointed receiver under the same decree to take possession of the property and collect the rents during the redemption period for the purpose of satisfying the deficiency judgment. After the decree was entered and the receiver had been appointed and taken possession of the property the Stover Company, Inc., filed an intervening petition to reclaim certain refrigerators (Frigidaires) which it alleged were sold to Leibowitz under a conditional sale contract and that he had defaulted in his payments. The chancellor denied the prayer of the reclamation petition and this appeal followed.

For convenience the Stover Company, Inc., will hereinafter be referred to as the “intervenor,” the complainant in the foreclosure proceeding, Simon Horvitz, as “respondent,” and the receiver, David Horwich, as “receiver.”

The intervening petition alleged that March 23, 1931, intervenor entered into a conditional sale contract with Harry Leibowitz, under the terms of which it installed 13 refrigerators in 13 apartments at 3502-8 West Van Burén street, Chicago, the premises foreclosed upon, and that Leibowitz agreed to pay $2,410.20 for them; that he paid $66.95 upon the signing of the contract and agreed to pay the balance of $2,343.25 in 35 equal successive monthly instalments, beginning with April 23,1931; that he failed to make the monthly payments due in December, 1932, and January, 1933, at which time there remained an unpaid balance of $1,339; and that demand was made on the receiver for the return of the refrigerators, with which he refused to comply.

Respondent’s answer alleged that he was the complainant in the bill to foreclose and under the terms of the junior mortgage deed upon which the foreclosure proceeding was based, the real estate, together with “all rents, issues and profits arising therefrom, including the heating, gas and plumbing apparatus, fixtures, and everything appurtenant thereto, together with all and after acquired property,” was conveyed by the mortgagor, Leibowitz, for the purpose of securing the indebtedness owing to respondent; that the refrigerators became part of the realty, and therefore his lien by virtue of his trust deed, as well as the decree entered in the cause, was superior to the “lien rights of the petitioner.” The receiver filed an answer which neither admitted nor denied the allegations of the intervening petition.

It was stipulated between the parties that the original purchase price of the 13 refrigerators was $2,410.20; that there was a balance due of $1,339; that there was default in the payment of the December, 1932, and January, 1933, instalments which became due under the terms of the contract between intervener and the mortgagor, Leibowitz; that a demand had been made on the receiver for the return of the refrigerators; that there was a deficiency decree for $1,631.76 in favor of respondent; and that the refrigerators originally were and continued to remain personal property up to and at the time of the hearing.

The agreement between the intervenor and Leibowitz for the purchase of the refrigerators, entitled “Frigidaire Order Form and Conditional Sale Contract,” was received in evidence and its material provisions are as follows:

“The undersigned seller hereby sells and the undersigned purchaser hereby purchases, subject to the terms and conditions hereinafter set forth, the property described below . . . for a total time price of . . . leaving a deferred balance of $2,343.25 .... The deferred balance is payable . . . in 35 equal successive monthly installments ....
“1. Title to said property shall not pass to the purchaser until said amount is fully paid in cash.
“4. The purchaser shall keep said property free of all taxes, liens, and encumbrances; . . . shall not transfer any interest in this contract or said property; . . .
“5. The above property shall remain personal property ....
“6. The operation of this Frigidaire is guaranteed for a period of one year from date of installation . . . .
“8. In the event purchaser defaults on any payment . . . the full amount shall be immediately due and payable, the seller . . . may take immediate possession of said property without demand . . . and for this purpose the seller may enter upon the premises where said property may be and remove same. The seller may resell said property, so retaken, at public or private sale .... From the proceeds of any such sale, the seller shall deduct all expenses for retaking, repairing and selling such property, including a reasonable attorney’s fee. The balance thereof shall be applied to the amount due; any surplus shall be paid over to the purchaser. In case of deficiency the purchaser shall pay the same with interest and the purchaser does hereby confess judgment in the amount of such deficiency. ...”

The theory of respondent and receiver is that the contract in question is a chattel mortgage rather than a conditional sale contract, and is, therefore, void as against respondent who was a judgment creditor of Leibowitz, as well as against the receiver for failure to comply with statutory filing requirements.

Despondent’s original theory as set forth in his answer was that the refrigerators were fixtures and had become a part of the realty covered by his lien under his trust deed, but this defense was abandoned and waived at the hearing by both respondent and the receiver, who stipulated that the refrigerators remained personal property.

Intervenor contends that its contract with the mortgagor, Leibowitz, is a valid conditional sale contract and that under its terms it is entitled to regain possession of the refrigerators. Section 20 of the Uniform Sales Act, ch. 121a, Cahill’s Revised Statutes, 1931, ff 23 (enacted in 1915), provides:

“Where there is a contract to sell specific goods, or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of possession or property in the goods until certain conditions have been fulfilled. The right of possession or property may be thus reserved notwithstanding the delivery of the goods to the buyer . . . .”

Long prior to the passage of this act conditional sale contracts were recognized and enforced in this State except as against bona fide purchasers and execution creditors. In 1898 our Supreme Court in Gilbert v. National Cash Register Co., 176 Ill. 288, a leading case on the subject, said at pp. 294, 295:

“It seems to be settled by the weight of authority, that ‘where by the written contract of the parties it is expressly provided that the title to the property shall remain in the vendor until the purchase money is fully paid, and there is no reservation of a lien, the transaction is a conditional sale and not a mortgage. ’ (6 Am. & Eng. Ency. of Law, — 2d ed. — p. 446.)

. . . The cases seem to hold, that there is no doubt as to the character of the instrument when, by its terms, personal property is delivered by the owner to another with the requirement that the title shall remain in the owner until the payment of the purchase price. In such case the transaction is uniformly held to be a conditional sale, and not a mortgage.

“In Plummer v. Shirley, 16 Ind. 380, where an instrument was given upon a sale and delivery of personal property and provided that the ownership thereof was to remain exclusively vested in the vendor and not in the vendee, until the latter had fully paid the purchase money, it was held that the parties intended a conditional sale, and not a mortgage. To the same effect are the following cases: Sumner v. Woods, 52 Ala. 94; Bingham v. Vandegrift, 93 id. 283; Jowers v. Blandy, 58 Ga. 379; Nichols v. Ashton, 155 Mass. 205; McComb v. Donald, 82 Va. 903; McGinnis v. Savage, 29 W. Va. 362; W. W. Kimball Co. v. Mellon, 80 Wis. 133; ‘The Marina,’ 19 Fed. Rep. 760; Vasser v. Buxton, 86 N. C. 335; Frick v. Hilliard, 95 id. 117. The authorities thus quoted from and referred to lead us to the conclusion, that the instrument here under consideration describes a transaction which is a conditional sale, and not a mortgage.”

It is urged by respondent, and the receiver, that the proper construction of the contract involved in this proceeding must inevitably lead to the conclusion that it is a chattel mortgage rather than a conditional sale contract, which it purports in plain terms to be. Mindful that the real distinction between a conditional sale, and an absolute sale with a chattel mortgage back, is that under the former the vendor remains the owner subject to the vendee’s right to acquire the title by complying with the stipulated conditions of the contract, while under the latter the vendee immediately becomes the owner subject to the lien created by the mortgage (Bailey v. Baker Ice Machine Co., 239 U. S. 268), and also mindful of the clearly expressed intention of the parties from all of the language used in the contract and the purpose of the agreement as evidenced by its provisions and the conduct of the parties, we are compelled to conclude there is no merit in the contention that this contract should be held to be a chattel'mortgage. The document is neither ambignous nor uncertain in its terms and .expresses as clearly as words can the intent of the parties to enter into a conditional sale contract.

It is true that respondent cites cases from Michigan, Colorado and Washington, that apparently sustain his position and construe contracts such as the one under consideration as chattel mortgages, but a careful examination of all the authorities cited, and many others, leads us to the conclusion that the decisions referred to are contrary to the overwhelming weight of authority in this country. Modern business, and its exigencies, was undoubtedly responsible for the present legal acceptance of the efficacy of conditional sale contracts and the magnitude of the business conducted by means thereof is generally recognized.

It is insisted, notwithstanding that clause 1 of the agreement quoted definitely reserved title to the refrigerators in the vendor until they were fully paid for, and notwithstanding the clearly expressed intention of the parties to the effect that it was a conditional sale, that clause 8, the so-called deficiency provision of the contract, converted it into a chattel mortgage regardless of all other considerations.

Conditional sale contracts containing deficiency clauses have been held to be valid, and have been repeatedly approved by the Supreme Court of the United States and by the courts of review of a great majority of our sister States. Such contracts which contain provisions for repossession and resale of the property sold upon default in the payment of instalments due on same, the application of the proceeds of the sale to the unpaid balance of the purchase price, and the liability of the vendee for any deficiency remaining, have been upheld by the Supreme Court of the United States and by the courts of review of most other jurisdictions. That the inclusion of such provisions in a conditional sale contract does not change its character was declared in a well considered opinion by Mr. Justice Bigelow in Herbert v. Rhodes-Burford Furniture Co., 106 Ill. App. 583, where it was said at pp. 587, 588:

“Is, then, the clause which provides, in case appellee shall take possession of the property, that it shall be sold, ‘and out of the proceeds of sale retain a sufficient amount to pay the balance owing' thereon,’ so inconsistent with the idea that title was to remain in appellee that the transaction was an out-and-out sale? . . . Both reason and authority tells us, that there is nothing inconsistent in the provisions which declare that the title to the property shall remain with the vendor until payment has been made, and that in case the vendor, for breach of contract, shall retake the property, he shall sell it and pay himself the balance of the debt and pay over the balance of the proceeds to the vendee. In matters of conditional sale the law seems to be that ‘if the condition of payment is not fully complied with or waived, the original vendor’s rights become perfect and absolute, and he may follow the property ... or recover its full value, and without any deduction for any partial payments made by the original vendee; they are all forfeited.’ ” Benjamin on Sales (Bennett’s Ed. 1888), 270, and cases cited.

Substantially the same stipulations as appear in the contract in the instant case were contained in the contract before the Supreme Court of the United States in Harkness v. Russell & Co., 118 U. S. 663, 666, where the court held:

“The first question to be considered is, whether the transaction in question was a conditional sale or a mortgage; that is, whether it was a mere agreement to sell upon a condition to be performed, or an absolute sale, with a reservation of a lien or mortgage to secure the purchase money. If it was the latter, it is conceded that the lien or mortgage was void as against third persons because not verified by affidavit and not recorded as required by the law of Idaho. But, so far as words and the express intent of the parties can go, it is perfectly evident that it was not an absolute sale, but only an agreement to sell upon condition that the purchasers should pay their notes at maturity. The language is: ‘The express condition of this transaction is such that the title . . . does not pass . . . until this note and interest shall have been paid in full.’ If the vendees should fail in this, or if the vendors should deem themselves insecure before the maturity of the notes, the latter were authorized to repossess themselves of the machinery, and credit the then value of it, or the proceeds of it if they should sell it, upon the unpaid notes. If this did not pay the notes, the balance was still to be paid by the makers by way of ‘damages and rental for said machinery.’ ... It cannot be said, therefore, that the stipulations of the contract were inconsistent with, or repugnant to, what the parties declared their intention to be; namely, to make an executory and conditional contract of sale. Such contracts are well known in the law and often recognized; and when free from any fraudulent intent are not repugnant to any principle of justice or equity, even though possession of the property be given to the proposed purchaser. The rule is formulated in the text books and in many adjudged cases.”

The following succinct statement of the rulet as enunciated in recent cases from many jurisdictions is found in 37 A. L. R., p. 94:

“It has been held that the seller of property by conditional sale may resume possession thereof to increase his security, and resell it on account of the vendee, if the latter is in default and where this remedy is given by the contract, if the proceeds of the sale are insufficient to satisfy the amount due on the purchase price, the seller may, in an appropriate action, hold the buyer for the residue.” (Italics ours.) To the same effect are Keeler v. Goodman, 296 Fed. 909; O. S. Stapley Co. v. Rogers, 25 Ariz. 308, 216 Pac. 1072; Matteson v. Equitable Min. & Mill. Co., 143 Cal. 436, 77 Pac. 144; Continental Guaranty Corp. v. People’s Bus Line, 31 Del. 595, 117 Atl. 275; Daniel v. Thornton & Co., 28 Ga. App. 428, 111 S. E. 575; Lumbar v. Janzen, 112 Kan. 197, 210 Pac. 186; Rodgers v. Whitehead, 127 Miss. 21, 89 So. 779; First Nat. Bank of Missoula v. Marlowe, 71 Mont. 461, 230 Pac. 374; J. B. Van Derveer & Son v. Canzono, 206 App. Div. 130, 200 N. Y. S. 563; McCormick Harvesting Mach. Co. v. Koch, 8 Okla. 374, 58 Pac. 626; International Harvester Co. v. Bauer, 82 Or. 686, 162 Pac. 856; and Jones v. Reynolds, 45 Wash. 371, 88 Pac. 577.

Since the passage of the Uniform Sales Act in this State, Cahill’s St. ch. 121, If 4 et seq., the validity of conditional sales has been recognized as against bona fide purchasers and execution creditors. (Sherer-Gillett Co. v. Long, 318 Ill. 432.) While this case concerned only the rights of a bona fide purchaser from a conditional vendee, the reasoning of the court and the conclusions reached are equally applicable to judgment and execution creditors of such a vendee. At pp. 434, 435, the court said:

“It is a general, well-established principle that no. one can transfer a better title than he has. (Drain v. LaGrange State Bank, 303 Ill. 330; Williams v. Merle, 11 Wend. 80, 25 Am. Dec. 604.) . . . The Uniform Sales act recognizes the validity of such contracts and specifically provides that no title can be passed by the purchaser of goods under such a contract ‘unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.’ There is no basis for the operation of an estoppel in this record. ’ ’ In our opinion the authorities are decisive that the contract under consideration is a conditional sale contract, that it is valid and contains no provisions that render it susceptible of being construed as a chattel mortgage.

It is urged that the receiver occupied the position of a sheriff, levying upon the refrigerators in respondent’s behalf. What could be more contrary to law and reason? The receiver was ordered to take possession of the premises with well defined duties to perform, which certainly did not include the seizure of the refrigerators that were admittedly personal property, for the purpose of satisfying respondent’s deficiency judgment under the decree or for any other purpose. The receiver had no more authority to seize or withhold the possession of the refrigerators than he would have had to seize and sell an automobile, piano, or any other article of personal property belonging to Leibowitz or his conditional vendor, and in our opinion the chancellor was clearly in error in refusing to order the return of the refrigerators to intervenor.

For the reasons indicated the order or decree of the circuit court is reversed and the cause is remanded with directions to the chancellor to order the receiver to surrender the refrigerators to intervenor.

•Reversed and remanded with directions.

Gridley and Scanlan, JJ., concur.