author: Mr. Justice Gridley

text:
    Joseph H. Beuttas, Appellant, v. Edward A. Garvey, Trading as Ed. A. Garvey & Company, Appellee.
    Gen. No. 36,044.

      Opinion filed April 11, 1933.
    Rehearing denied April 24, 1933.
    Sonnenschein, Berkson, Lautmann, Levinson & Morse, for appellant; I. E. Ferguson and Jesse H. Brown, of counsel.
    John A. Pakenham, for appellee.
   Mr. Justice Gridley

delivered the opinion of the court.

Plaintiff prosecutes this appeal to reverse a judgment for costs against him, entered by the superior court in an action of assumpsit on March 26, 1932, following the verdict of a jury finding the issues in defendant’s favor.

The action, commenced on March 20, 1928, is to recover damages, in the sum of $7,575, plus certain interest, for defendant’s “holding over” after a claimed termination by plaintiff of a written lease of which defendant was the lessee in possession. To plaintiff’s declaration, consisting of a special count and the common counts, defendant filed a plea of the general issue and supported the same by a second amended affidavit of merits. On July 12, 1929, on plaintiff’s motion, the court struck the affidavit “for insufficiency,” defaulted defendant for want of an affidavit of merits and, it appearing that plaintiff admitted a credit of $4,513, “paid to him by the Maryland Casualty Co.,” entered judgment against defendant for $3,539.12. Fróm the judgment defendant appealed to this court and on April 22, 1930, that judgment was reversed and the cause remanded for reasons stated in an unpublished opinion hereinafter referred to. (Beuttas v. Garvey, 257 Ill. App. 628.)

In the special count plaintiff alleged in substance that on May 15,1924, the written lease (copy attached) was executed and delivered by the executors and trustees under the last will of Henry Sampson, deceased, as lessors, wherein they demised to defendant, as lessee, the first floor of the building known as 329-35 Plymouth court, Chicago, for the term from May 1, 1925, to April 30, 1928, at a rental of $450 a month; that by a rider, attached to and made a part of the lease, the lessors reserved the right to cancel the lease on May 31, 1925, “or on the last day of any calendar month thereafter during the term of the lease, by giving to the lessee six (6) months’ notice in writing of their election so to do, provided that the building in which the premises were situated or the ground on which it stood, or both, should be sold or leased for a term of not less than twenty (20) years, or if the building was to be demolished ’ ’; that by the eighth clause of the lease defendant, as lessee, covenanted with the lessors that he, “at the termination of said lease by lapse of time or otherwise ,” would yield up immediate possession of the premises to the lessors, and, failing so to do, would “pay as liquidated damages, for the whole time such possession should be withheld, the sum of twenty-five ($25) dollars per day”; that on July 14, 1926, plaintiff purchased from the lessors their interests in the lease and the building and ground, and the lease was duly assigned to him; that on July 17, 1926, in accordance with the terms of the lease, “six (6) months’ written notice of election to terminate said lease was served upon defendant, and said lease was terminated as of January 31, 1927”; that notwithstanding defendant’s covenants, he did not yield up possession of the premises, but “wholly refused so to do and wrongfully withheld possession from plaintiff in manner and form as hereinafter alleged”; that on February 24, 1927, plaintiff instituted an action in forcible detainer against defendant in the municipal court of Chicago, entitled Beuttas v. Garvey, No. 1,573,214, in which action plaintiff, on April 27, 1927, recovered a judgment against defendant for the restitution of the premises and from which judgment defendant appealed to this court; that thereafter on January. 30, 1928, the judgment of the municipal court was here-affirmed (see Beuttas v. Garvey, 247 Ill. App. 630); that pending that appeal defendant for a time continued to withhold possession of the premises, and “plaintiff was wrongfully prevented from obtaining the possession thereof for the period from February 1, 1927, to December 1, 1927 (i. e., for 10 months), upon which last mentioned date defendant vacated the premises ’ ’; that thereby plaintiff sustained damages “which had previously been liquidated between the parties hereto, for the whole time such possession should be withheld by defendant, at the sum of $25 for each and every day, which said liquidated damages amount to $7,575, together with interest on each of said $25 installments from the day when the same became due, as aforesaid, at 5 per cent per annum”; that by reason of the foregoing, defendant became indebted to plaintiff in said sum and interest, and being so indebted promised to pay the same; but that, although often requested, defendant has refused to pay the same or any part thereof; to plaintiff’s damage, etc. Accompanying the declaration is an affidavit of claim to the effect that plaintiff’s demand is for damages sustained by plaintiff by the wrongful withholding of the premises “for a period of 303 days,” said damages “having theretofore been liquidated by said lease at the sum of $25 per day”; and that said damages amount to $7,575, plus interest, etc.

From the copy of the lease, attached to the declaration, it appears that it is on a printed form filled in by typewriting, that it contains covenants common in such instruments, and that in the eighth clause (printed in small type) defendant, as lessee, covenanted and agreed with the lessors as follows:

“Eighth. At the termination of this Lease, by lapse of time or otherwise, to yield up immediate possession to said party of the first part (the lessors), and failing so to do, to pay as liquidated damages, for the whole time such possession is withheld, the sum of twenty-five ($25) dollars per day.”

The said rider, expressly made a part of the lease and signed by the lessors and defendant as lessee, is in typewriting and is as follows:

“The lessors reserve the right to cancel the within lease on May 31, 1925, or on the last day of any calendar month thereafter during the term of the lease, by giving to the lessee six months’ written notice of their election so to do provided that the building in which the premises are situated or the ground on which it stands, or both, shall be sold or leased for a term of not less than 20 years, or if the building is to be demolished, and provided further that the lessors shall pay to the lessee, in the event of such cancellation during the first year of the term of the lease, the sum of $1,000, and if during the second year of the lease the sum of $500, it being understood and agreed that said sum shall be paid to the lessee provided he shall not be in default of any of the covenants of this lease and after lessee shall have delivered up peaceable possession of the premises within the time specified in such notice of cancellation. ’ ’

It will be noticed that by the terms of the rider the right of the lessors to cancel the lease on six months’ written notice is predicated upon certain conditions or provisos, viz. (a) that the building or ground, or both, shall be sold or leased for a term of not less than 20 years, or (b) if the building is to be demolished. It also will be noticed that in the rider there is no provision for liquidated damages, in case the lessors elected to cancel the lease under the provisions of the rider and in case the lessee failed to surrender possession of the premises when the cancellation should become effective. Nor is there any reference made in the rider to said eighth clause of the lease.

In defendant’s said affidavit of merits (which the superior court originally struck from the files for insufficiency) he alleged six different grounds of defense in substance as follows:

1. That he does not owe plaintiff the sum of $25 per day for the time he occupied the premises after the alleged termination of the lease, and that the Maryland Casualty Co. has paid to plaintiff all sums owing by him for rent and damages for the occupancy of the premises.

2. That the statements in plaintiff’s notice of termination of the lease (viz., because of the sale and proposed demolition of the building) were untrue or that plaintiff after giving such notice abandoned his intention of such sale and proposed demolition; that before the date of the termination of the lease, as mentioned in said notice, plaintiff, by an agent, notified defendant to “ignore said notice of termination”; and that before said date “plaintiff entered into a new lease with this defendant for additional space in the same building which lease was not to expire until the time for the expiration of the original lease, and plaintiff accepted rent from this defendant for said additional space until the expiration of said new lease, and long after the date set for the termination of the original lease.”

3. That because of the notice given to defendant by plaintiff’s agent (that said notice of termination was to be ignored), defendant in good faith did not surrender possession of the premises on the date stated in the notice of termination and remained in possession.

4. That before the said termination date had arrived, an agent of plaintiff informed defendant that plaintiff would be willing to have defendant remain in possession under the original lease if he would pay a higher rent, and defendant alleges the notice of termination was not given in good faith.

5. That the sum of $25 a day, as provided in a covenant in the original lease, is not liquidated damages but is a penalty, for which defendant is not liable under the facts shown in connection with the alleged termination of the lease.

6. That the notice of termination was given by plaintiff under the provisions of the rider attached to the lease, and that the covenant in the lease (providing for $25 a day as liquidated damages) conflicts with the provisions in said rider.

In our opinion on the prior .appeal, wherein the former judgment in favor of plaintiff was reversed and the cause remanded, we held that defendant’s affidavit of merits “stated at least two good defenses” (viz., those stated in the second and fifth paragraphs), and that it was error for the court to strike the affidavit and enter judgment against defendant as in case of default. In the course of the opinion we said:

“If as stated in the second ground of defense plaintiff withdrew notice of the termination of the lease and defendant was thereby induced to hold over, defendant was entitled to set it up as a defense to any damages in excess of unpaid rent. As said in Kenwood Hotel Co. v. Hiland, 153 Ill. App. 108, 114, the law will not uphold or justify a landlord in inducing a tenant to remain in possession of the premises after the expiration of the lease, and then enforce against him liquidated damages beyond the rental value of the premises for withholding’ the same. The court also said that while such an act on the part of the landlord might not be a defense to an action for possession, it is a defense to the recovery of any amount beyond the rent reserved in the lease, or the rental value of the premises. On the principles there stated we think the second ground of defense was good as to any damages in excess of unpaid rent. . . .

“The fact pleaded in the declaration that plaintiff obtained possession of the premises in question under a judgment in a forcible detainer proceeding that was affirmed by this court did not, as argued, constitute res adjudicata of the question of damages in excess of unpaid rent. The issues in the two causes of action are entirely different.

“The fifth defense was also good. It cannot be said as a matter of law that the provision for liquidated damages should not be interpreted as a penalty. The language of the contract in that respect is not of itself conclusive. (Advance Amusement Co. v. Franke, 268 Ill. 579, 581.) As said in that case (p. 582) courts will look to see the nature and purpose of fixing the amount of damages to be paid, and if it appears to have been inserted to secure the prompt performance of the agreement it will be treated as a penalty and not more than actual damages proved can be recovered. (Citing Westfall v. Albert, 212 Ill. 68, 74.) We do not think without any evidence the court could say merely from an inspection of the lease, made a part of the declaration, that the damages sustained from holding over should necessarily be construed as liquidated. There is nothing therein to indicate that the actual damages could not be ascertained. In doubtful cases the courts are inclined to construe the stipulated sum as a penalty. (Iroquois Furnace Co. v. Wilkin Mfg. Co., 181 Ill. 582, 602.) Whatever the ground for termination of the lease, evidence might disclose no actual damages, or if so, much less than those fixed in the lease.”

During March, 1932, long after the mandate of this court had been filed in the superior court, the cause there came on for trial before a jury. Plaintiff called his ‘.‘real estate manager,” Charles M. Dockhum, and the defendant, Garvey, as witnesses, and also introduced in evidence the lease sued upon; the written notice to terminate the lease, dated July 15, 1926; a certified copy of the judgment of the municipal court against defendant in the forcible detainer proceeding, entered April 27,1927; and a certified copy of the judgment of the Appellate Court, entered January 30,1928, affirming said judgment in the forcible detainer proceeding. The material provisions of the lease have heretofore been set forth. The written notice to terminate the lease, which defendant testified he received “during the latter part of July, 1926,” is signed by “Alicia L. Byrne” and by “Robt. Shanklin & Co., as Agents,” is addressed to defendant, and is as follows:

“You are hereby notified that the building known and described as 329-35 Plymouth Court, Chicago (whereof you occupy the first floor), and the ground on which said building stands, has been sold, and that said building is to be demolished.

“You are further notified that, by reason of said sale and the proposed demolition of said building, and in accordance with the terms and conditions of the lease of said first floor, executed ... by you as lessee, I hereby exercise my right to cancel and do hereby cancel said lease, such cancellation to become effective and said lease to be terminated on January 31,1927.

“Any sum of money due you under the terms of said lease by virtue of this cancellation will be paid you in accordance with the terms of said lease.

“You are therefore notified to vacate and surrender up possession of said premises on said January 31, 1927.”

By the copy of the judgment of the municipal court it appears that the court, following the verdict of a jury, adjudged that plaintiff “have and recover from defendant (Garvey) the possession ■ of the premises (describing them) and that a writ of restitution issue.” It further appears that from that judgment defendant duly perfected an appeal to the Appellate Court by the filing of an appeal bond in the sum of $5,000, signed by him and by the Maryland Casualty Co., as surety; and that the bond was conditioned (in accordance with section 19 of the Forcible Entry and Detainer Act, Cahill’s St. ch. 57, Ü 20) that defendant “pay all rent now due or that may become due before the final determination of this suit, and also all damages and loss which the plaintiff has sustained or may sustain by reason of the withholding of the premises in controversy,” etc.

During the introduction of plaintiff’s case, defendant’s attorney admitted that defendant, notwithstanding the notice to terminate the lease on January 31, 1927, did not vacate the premises on that date, but continued to occupy the same until November 30, 1927, a period of 10 months, and that defendant during that period did not pay, although he tendered it, the stipulated monthly rent of $450. He further stated that the rent for the 10 months, amounting to $4,500, had, since defendant’s vacation, been paid to plaintiff by the Maryland Casualty Co. for defendant.

Plaintiff’s witness, Doclchum, testified that he, as plaintiff’s agent, received from defendant the rent due for the month of January, 1927; that after January 31, 1927, he received no moneys for rent of the premises in question from defendant; that after the forcible detainer litigation had finally been decided, and “during April, 1928, ’ ’ he, as plaintiff’s agent, received from the Maryland Casualty Co. (surety on defendant’s appeal bond), “on account of defendant’s possession of the first floor of the building, a few dollars over $4,500”; that, as he remembers it, “the amount was $4,527,” but that he does not know “what the odd amount was for ’ ’; and that said $4,527 was credited to defendant “on account of rent.” He further testified that plaintiff acquired the property and building “early in 1926”; that at that time Shanklin & Co. were the agents of the property and collected the rents; that they ceased to be such agents about December 1, 1926; that after plaintiff acquired the property “a lease was made to defendant for additional space in the building, other than the first floor, namely Boom 304”; that the monthly rent for said space was $15; that the term expired on April 30, 1928; but that he believes the defendant vacated said space on November 30, 1927, at the same time that he vacated the first floor.

Thereupon plaintiff’s attorney made certain computations as to the net amount that plaintiff was entitled to recover on his theory. Without offering any proof of actual damages suffered by plaintiff because of defendant’s “holding over” and occupying the premises after January 31, 1927, and until Novemher 30, 1927, he claimed that said net amount was $3,802.48, and that that sum was arrived at by charging, because of the provisions of the rider and of the eighth clause of the lease, liquidated damages at $25 per day for 303 days, or $7,575, and deducting therefrom the amount of $4,527, as paid to plaintiff by the Maryland Casualty Co. on defendant’s behalf, and making certain charges for interest. And thereupon plaintiff first rested his case.

Upon defendant moving for a directed verdict in his favor, on the theory that plaintiff had not made out a sufficient - prima facie case, there followed considerable discussion before the court, and not in the jury’s presence. The court, having before him a copy of the opinion of this court on the former appeal and treating the same as determining the law to be applied to the case, stated to plaintiff’s attorney: “I do not think you have made out a prima facie case; . . . I will give you a chance to prove what your damages are, if you want to. I hold that the Appellate Court in this case has decided that mere proof of the lease does not prove the damages. . . . The case will be reopened to allow you to show what your damages are.” Thereupon plaintiff’s attorney stated that he desired to introduce further evidence, and, the jury being recalled, plaintiff testified as a witness in his own behalf, and called William G-allauer, a real estate expert, who testified in substance that the first floor space of the building occupied by defendant had an area of 6,300 square feet, and that, in his opinion, during the years 1926 and 1927, the fair and reasonable rental value of that space was “from $1.50 to $1.75 per square foot per year.” Plaintiff’s testimony as to rental value was to the same effect. This was the only testimony offered by him bearing on the question of his actual damages. Plaintiff further testified that his business was that of a contractor, and engaged in the buying, operating and selling from time to time of various buildings in Chicago; that he purchased the property and building in question in July, 1926; that thereafter he had a few conversations in his office with defendant; that he had one during • November, 1927, just prior to defendant vacating the premises, but that he “does not recall” that he then said to him that “he could remain in that space at $450 per month provided he would execute a lease with a 60-day cancellation clause”; that he recollects that after he purchased the building, and after said termination notice had been served on defendant, he leased to defendant “some additional space on a different floor of the building”; but that he “can’t tell how long defendant paid rent for that additional space.” No evidence whatever was introduced by plaintiff tending to show that at the time said notice of termination of the lease was served upon defendant in July, 1926, or at any time thereafter, plaintiff had any intention of causiiig the building in question to be demolished.

Thereupon plaintiff again rested his case in chief. Defendant’s renewed motion for a directed verdict in his favor was denied and he was directed to proceed and introduce evidence to substantiate his defenses as set forth in his affidavit of merits. Thereupon defendant testified that he became a tenant in the building under the lease sued upon in May, 1925; that he conducted his printing business on the first floor; that about the end of July, 1926, after he had been served with the written notice of termination of the lease, he had an interview with Boyal D. Smith, manager of the building under Shanklin & Co.; that “Mr. Smith then told me that they had decided to keep the building instead of tearing it down as originally planned and that he toanted me to remain in the premisesthat at Smith’s request he returned to him by mail the original notice of termination; that in the following November, after negotiation with plaintiff’s agents, Shanklin & Co., he received another lease for additional space on another floor of the building, expiring at the same time as his lease of the first floor, viz., April 30, 1928; that the stipulated rent for this additional space was $15 per month; and that he paid that rent until he moved out of the building in November, 1927. (The said lease was introduced in evidence; it is signed by plaintiff by “Bobt. Shanklin & Co., Agts.,” and by defendant, as lessee; it is dated November 27, 1926; it demises “Boom 304 — No. 329 Plymouth Court”; its term is from December 1, 1926, to April 30, 1928; and it contains a provision whereby the lessor [plaintiff] “reserves' the right to terminate this lease by giving lessee sixty [60] days’ previous written notice in the event lessor decides to erect a building, or leases entire property to one tenant or effects a sale of the property.”) Defendant further testified:

“I first met Mr. Beuttas in April, 1927, in the Municipal court. I next saw him in his office in July or August, 1927, and had a conversation with him. I asked Beuttas just what he wnnted, whether the space or his money. . . . He was suing for the premises, yet he wanted me to remain there. . . . Beuttas said he was only anxious to obtain a shorter cancellation notice in all of his leases in the building, that he was not interested in my vacating the premises, but would give me a new lease at the same rate, provided I gave him a 60-day cancellation clause. I told him that was impossible, because printing machinery and our line of business could not be moved within 60 days, so'he increased it to 90 days, and said he would .send Mr. Manning (his then agent) over with a lease. Manning brought me the new drafted lease in September, 1927, and told me that, for a consideration of $750 per month, he would allow me to use the second floor and the premises that ,1 then was occupying. I told "Manning I would take it under consideration. I had a later conversation with Manning and told him that I would not sign the proposed new lease, because I had just entered into .an agreement with the Lambert Tree estate to move into one of their premises on Wacker Drive at the same rental that I had been paying at Plymouth Court. . . . After the municipal court judgment of April 27, 1927, I could not vacate on 24 hours’ notice, and I had to take an appeal. I knew that Beuttas wanted me to get out then. . . . When I signed the original lease on May 15, 1924, I never noticed the clause as to the $25 per day as liquidated damages for such time as I should retain possession after termination of the lease.”

In rebuttal plaintiff gave further testimony and he called said Royal D. Smith, who testified that he “does not recall” having had any conversation with defendant concerning the written notice of termination of the lease, served on defendant in July, 1926, or that defendant returned the original notice to him by mail; and that he never told defendant that Beuttas had changed his mind about the notice, or that defendant might stay on in the building without regard to the notice. Plaintiff denied having such conversation with defendant in July or August, 1927, or later, as testified to by defendant, although he admitted having talked with defendant while the appeal from the municipal court judgment was pending. He further testified:

“I never told Garvey that I would send Manning to negotiate a new lease with him, or that I would be willing to lease to Garvey the first floor and a part of the second floor of the building at $750 per month. That proposition did not originate with me. Garvey came to Manning and made that proposal, and, when Manning asked me whether I would do that, I said 1 would, providing the new lease contained a 60-day or a 90-day cancellation clause. No such lease, however, was ever made.”

At the conclusion of all the evidence plaintiff’s motion for a directed verdict in his favor in the sum of $3,802.48, was denied by the court, and, after the case had been argued by the attorneys for the respective parties and the court had instructed the jury, a verdict was returned and a judgment entered in favor of defendant, as first above mentioned.

It is contended by plaintiff’s counsel that the trial court erred “In holding that the agreement of the parties (that in case of a holdover after termination of the lease the defendant should pay $25 a day) was an agreement for a penalty and not for liquidated damages.” It is a sufficient answer to the contention to say that the present record does not disclose that the trial court made such a holding.

It is also contended that, because of the rider and the eighth clause of the lease, and the written notice of termination of the lease duly served on defendant, plaintiff “made out a sufficient prima facie case of damages” by introducing said lease and notice in evidence and showing that after the termination date defendant had withheld possession of the premises for a period of 303 days, and that, after plaintiff had first rested his case, the court erred in compelling plaintiff to make some proof of actual damages. And it is argued that the court by its ruling “relieved defendant of the burden of proving an affirmative defense,” (that the covenant in the eighth clause really provided for a penalty rather than for liquidated damages). We find no merit in the contention or argument. The mentioned affirmative defense is only one of several pleaded defenses, as stated in defendant’s affidavit of merits. Furthermore, plaintiff acquiesced in the court’s ruling and introduced additional evidence as a part of his prima facie case and the court did not relieve defendant of the burden of proving his pleaded defenses.

Equally without merit in our opinion, is counsels’ further contention that, after plaintiff had made his prima facie case and while defendant was introducing evidence to prove his defenses as pleaded, the court erred in admitting any of defendant’s offered evidence which tended “to challenge the good faith of plaintiff’s termination of the lease.” It is clear to us that if plaintiff’s attempted termination of the lease was not done in good faith the provisions of the eighth clause of the lease, providing for liquidated damages beyond the stipulated rent, could not properly inure to plaintiff’s benefit. And we do not think, as counsel further contend, that the judgment of the municipal court in the forcible detainer proceeding can properly be considered as res adjudicata as to the question, involved in the present suit, of damages in excess of the stipulated rent, which, as it appears, plaintiff has received. Indeed, in our former opinion, this res adjudicata contention was decided adversely to plaintiff.

Plaintiff’s counsel further contend that at the close of all the evidence the court should have allowed plaintiff’s motion for a directed verdict in his favor in the sum of $3,802.48. We think that the motion was properly denied. In our former opinion, in commenting upon the six grounds of defense, as set forth in defendant’s affidavit of merits, we held that the second and fifth grounds stated good defenses to plaintiff’s action. And an examination of defendant’s evidence, as contained in the present transcript, discloses to us that such evidence sufficiently tended to prove those defenses as warranted the case being passed upon by a jury. And we think that the same may be said of defendant’s fourth ground of defense.

It is further contended that the verdict and judgment are contrary to the manifest weight of the evidence. Although the evidence on certain material points is conflicting we are unable to agree with counsels’ contention.

Complaint is made that the court erred in refusing to give to the jury certain instructions offered by plaintiff and in giving certain other instructions offered by defendant. In view of all the facts and circumstances in evidence, and considering the authorities cited in our former opinion and other adjudicated cases, we are of the opinion that the jury were fully and fairly instructed and that there is no such error, as regards the instructions, as warrants a reversal of the judgment.

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

Affirmed.

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


source: Caselaw Access Project

author: Mr. Justice G-ridley

license: Public Domain

text:
    Joshua R. H. Potts, Appellee, v. Grand Lodge Ancient Order of United Workmen of Iowa, Appellant.
    Gen. No. 36,201.

      Opinion filed April 11, 1933.
    Rehearing denied April 24, 1933.
    Deneen, Healy & Lee, for appellant; Roy Massena and Donald N. Schaffer, of counsel.
    Eugene Vincent Clarice, for appellee.
    Joshua R. H. Potts, pro se.

   Mr. Justice G-ridley

delivered the opinion of the court.

In an action in assumpsit to recover the loan values mentioned in three certificates of life insurance issued by defendant to plaintiff, the court, on plaintiff’s motion, on July 14, 1932, struck from the files defendant’s third amended affidavit of merits (accompanying its plea of the general issue to plaintiff’s declaration), defaulted defendant for want of an affidavit of merits, assessed plaintiff’s damages at $2,790 (being the aggregate loan values mentioned in the three certificates), and entered judgment against defendant in that sum. The present appeal followed.

The ultimate question to be decided is whether the affidavit of merits stated one or more sufficient defenses to plaintiff’s action.

In plaintiff’s declaration, filed June 9, 1932, after stating that defendant is a fraternal insurance society, incorporated under the laws of Iowa and authorized to do business in Illinois, and that he has three causes of action against defendant on three certificates of insurance, he alleged in count one that defendant, on February 21,1917, executed and delivered to him its certificate of life insurance, No. 14,353, and therein promised and agreed, among other things, that it would make a “cash loan” to him of $780. The certificate is set out in full, the material provisions of which are in substance as follows:

That Joshua E. H. Potts (plaintiff) is a member in good standing of Peabody Lodge, No. 143, of the Society, in Chicago, and entitled to all the rights and privileges of such membership; that in case of his death in good standing his wife, as beneficiary, is entitled to participate in the beneficiary fund of the Society to the amount of $2,000, which sum, subject to certain mentioned conditions, shall be paid within 90 days after proof of the member’s death; and that “this certificate, the application for membership and medical examination, the articles of incorporation, by-laws, rules and regulations of the Society, now in force or which may hereafter be enacted or adopted, shall together constitute the contract between the Society, the member and the beneficiary.”

Under the heading “Condition,” is the statement that the law of Illinois, or ruling of the Commissioner of Insurance, “does not permit fraternal societies to give an option in cash to their members; therefore, the figures under ‘cash loan value’ in the following table will not be available to the member . . . unless the law or ruling is changed so as to permit such option, in which event the option will be effective from the date of this certificate. ’ ’ Then follows, under the heading “Guaranteed Options,” a table or schedule as to “Cash Loans, Paid up Certificate and Extended Insurance Values,” in which the cash loan value, after the certificate has been in force for fifteen (15) years, is stated to be “$780.” In the table, also, are stated respectively the cash loan values in lesser amounts from three to fourteen years. And it is further stated that “after three years continuous membership, the member . . . will be entitled at his election to one of the options set forth in the above table.” Under the heading ‘ ‘ Cash Loans,” it is further stated that “upon written application to the Home Office of the Society at Des Moines, Iowa, the member will be entitled to receive a cash loan, as per above schedule, upon the sole security of this certificate, and provided the insured executes a loan agreement, as per a form to be furnished by the Society, such application to be accompanied by the certificate and evidence that the current dues and assessments have been paid.”

In said count one of the declaration plaintiff further alleged that he has at all times kept and performed all the terms and conditions of the certificate upon his part to be kept and performed; that he has paid all required dues and assessments; that since February 21, 1917, he has continuously been a member of the society and said certificate has been in full force and effect; that the law of Illinois, stated in the certificate as not permitting fraternal societies to give an option in cash to their members, “was changed so as to permit such option”; that on February 15, 1932, plaintiff made written application to defendant at its home office “for a cash loan of $780,” and at the same time “executed a loan agreement as per a form furnished by defendant,” and forwarded both, together with his certificate and evidence of his having paid all dues and assessments to defendant; that by reason of the foregoing defendant, on February 21, 1932, “became liable to pay to plaintiff the sum of $780, as in and by said certificate by it promised and agreed”; but that, although often requested, it has refused to pay said sum, to plaintiff’s damage, etc.

Other counts of the declaration relate to claimed causes of action upon the other similar certificates. The allegations are substantially the same, except that in the second cause of action the count is predicated upon defendant’s certificate issued on February 21, 1917, for $3,000, in which the cash loan value after the certificate has been in force for 15 years is stated to be $1,170, and in the third cause of action the count is predicated upon defendant’s certificate issued on June 1, 1925, for $5,000, in which the cash loan value after the certificate has been in force for 6 years is stated to be $840.

In plaintiff’s affidavit of claim are allegations similar to those in the declaration with reference to the provisions of the certificate and plaintiff’s application for loans thereon. It is stated that the applications were made on forms provided and filled in by defendant “charging 6 per cent interest.” And the affidavit concludes with the statement that there is now due from defendant the said several sums of $780, $1,170 and $840 (a total of $2,790) with interest, etc.

Defendant’s said amended affidavit of merits was signed and sworn to by W. H. Stowell, grand recorder of defendant, and. filed on July 13, 1932, and its allegations are in substance as follows:

That defendant conducts its business as a fraternal beneficiary association, in accordance with certain sections of the Code of Iowa (some of which, in force prior to the issuance of said certificate, are set forth) ; that it is therein stated that the Insurance Commissioner shall be the “head of the Insurance Department” and have “general control, supervision and direction over all insurance business transacted in the State”; that in section 8829 of said Code it is provided in substance that among the securities, to be held by fraternal insurance societies in trust for the purpose of the fulfillment of its certificates or contracts, are “loans upon its own certificates,” where the same have been in force for at least two years, and that when a loan is made and the certificate deposited the amount of the loan shall be “a lien against such certificate”; that prior to the receipt of plaintiff’s application for said loans, defendant was “financially embarrassed,” in that it had a large part of its assets and moneys invested in “Iowa farm mortgages, real estate and bonds,” which, “under existing conditions, it would not be feasible to sell, and, if sold, would result in a great loss to defendant and all holders of its certificates”; and that the certificates sued upon provide that the certificate, articles of incorporation, and the by-laws, rules and regulations of defendant Society, in force when said certificates were issued or thereafter adopted, shall constitute the contract between the parties.

That defendant’s by-laws, in force prior to the receipt of plaintiff’s applications for said cash loans and expressly made a part of the contract between the parties, provided that defendant’s board of directors should have the general management of the business affairs of the Grand .Lodge, and full and complete authority in the matter of the investment of all of defendant’s funds, and the general supervision and control of defendant’s securities and property; that prior to the receipt of said applications, the board of directors, in pursuance of its by-laws, “adopted a rule that all certificate loans, thereafter to be made, should be made in the order in which applications therefor were received by defendant and as and when funds of defendant for payment thereof were available,” which rule under the provisions of the certificate issued to plaintiff became a part thereof; that from the times of the receipt of plaintiff’s applications for said cash loans up to the present time, said applications “were not reached for payment in their order of receipt, nor were there any funds of defendant available for the making of such cash loans to plaintiff”; that prior to the receipt of said applications for loans, and thereafter the Commissioner of Insurance of Iowa “refused to permit this defendant to withdraw, sell or dispose of any of its securities deposited with him, for the purpose of obtaining cash to make cash loans to certificate holders ’ ’; and that on February 24, 1932, the Commissioner of Insurance of Iowa issued an order to defendant, as of that date, as follows :

“In view of the fact that there is at the present time propositions for merger of the A. O. U. W. of Iowa with another fraternal society, . . . and in view of the fact that the assets of your society are somewhat impaired, it is the order of the Insurance Department of Iowa that you suspend, all policy loans until such a time that something can be worked out on the matters pending, as it is unfair that certain certificate holders in your society should receive preference over others.”

That said order of the Commissioner is still in full force and effect-and has not been modified; that under section 8835 of the Iowa Code, said Commissioner “has authority to suspend or revoke the certificate of authority of this defendant if it violated the above order”; that after the receipt of said order, defendant entered into a contract of reinsurance and merger with the Ancient Order of United Workmen of North Dakota, which contract was approved by said Commissioner of Iowa, in accordance with section 8861 of the Iowa Code; that said Commissioner directed that the contract be submitted to a special session of the Grand Lodge of defendant; that after notice had been given of the convening of such special session, by form approved by the Commissioner and under section 8862 of the Iowa Code, said special session was held on June 24, 1932; that at that session the contract was approved by more than a two-thirds vote of the delegates present; that thereafter the Commissioner issued an order to the effect that the contract had been approved and was in full force and effect; that all this was done in accordance with sections 8865 and 8866 of the Iowa Code; that “plaintiff herein was present and participated at said special session of the Grand Lodge at which said contract was approved”; that the contract of reinsurance and merger provided inter alia that “the privilege of male- . ing and demanding certificate loans on the security of certificates theretofore issued by defendant should be suspended from the effective day of the contract, June 24, 1932, until such time as the Commissioners of Insurance of Iowa and North Dakota should deem it feasible and good business to reinstate such privilege”; that by the contract said provision became a part of the by-laws of defendant and constituted an amendment thereof; and that the contract was approved by said Grand Lodge prior to the time any of the applications of plaintiff for cash loans were reached for payment in order of receipt of applications for loans from defendant’s certificate holders.

That with respect to plaintiff’s claimed first cause of action, the only agreement made by defendant with plaintiff, as set forth in the certificate and in plaintiff’s declaration, “was an agreement to make a cash loan to plaintiff of $780,” under certain conditions specified in the certificate; that as required therein, plaintiff executed a loan agreement, as per a form furnished by defendant, signed by plaintiff only; that by it “plaintiff promised and agreed to repay to defendant said sum of $780, on or before December 1,1932, with interest at 6% per annum payable semi-annually in advance”; that “there is no allegation in plaintiff’s declaration or affidavit of claim showing any damage to plaintiff by reason of the alleged failure or refusal of defendant to make said loan”; and that defendant denies that there is due from it to plaintiff said sum of $780, with interest from February 21, 1932, or any sum.

In the affidavit of merits there are similar allegations to those contained in the last above paragraph as regards plaintiff’s other two causes of action, based upon the two other certificates.

After reviewing plaintiff’s declaration, the certificate sued upon, and defendant’s affidavit of merits, we are of the opinion that the affidavit stated good defenses to plaintiff’s causes of action and that the trial court erred in striking the affidavit and in entering the judgment appealed from against defendant without a hearing. It appears that defendant is a fraternal insurance society, organized and operating for the mutual benefit of all of its members; that in the certificates is contained an express reservation of defendant’s right to amend its by-laws, rules and regulations, and it is expressly stated in each certificate that it, plaintiff’s application for insurance, the articles of incorporation of defendant and “the by-laws, rules and regulations of the Society, now in force or which may hereafter be enacted or adopted,” shall together constitute the contract between the Society, the member and the beneficiary; that in two of the certificates it is provided that after plaintiff has continuously been a member of the Society for 15 years, each has a certain “cash loan value,” and that plaintiff, upon his written application for a cash loan, is entitled to receive from defendant under certain conditions, cash loans in stated amounts; and that as to the third certificate, after a membership of six years and upon a similar application, plaintiff is entitled to receive a cash loan in the stated amount. It further appears that on February 15,1932, plaintiff made written applications to defendant, on blanks furnished by it, for the three loans and executed three loan agreements, providing for the repayment of the loans at stated times, but that defendant either failed or refused to make the loans. It is alleged in defendant’s affidavit of merits, as reasons for not making the loans, that “prior to the receipt of plaintiff’s applications” defendant was “financially embarrassed,” in that it had a large part of its moneys and assets invested in “Iowa farm mortgages, real estate and bonds,” which “under existing conditions” it would not be feasible to sell, and, if sold, would result in great loss to defendant and all holders of certificates; that also prior to the receipt of plaintiff’s applications, defendant’s board of directors in pursuance of its bylaws had “adopted a rule” that all certificate loans, thereafter to be made, should be made in the order in which applications therefor were received and “as and when funds of defendant for payment thereof were available”; that when the applications were received no funds of defendant were available for the making of the loans; that also prior to the receipt of the applications, the Insurance Commissioner of Iowa (acting under authority of the Iowa Statutes or Code) refused to permit defendant to withdraw, sell and dispose of any of its securities in order to obtain cash for the making of cash loans to certificate holders; that on February 24, 1932 (i. e., nine days after plaintiff had made his applications) the Commissioner issued an order to defendant directing it to “suspend all policy loans” until “something can be worked out on the matters pending,” and for the reasons (as stated in the order) that “propositions for merger” of defendant with another fraternal society are pending, that defendant’s assets “are somewhat impaired,” and that “it is unfair that certain certificate holders in your society should receive preference over others ’ ’ ; that under said Code the Commissioner “has authority to suspend or revoke the certificate of authority of this defendant if it violated the above order”; that after the receipt of the Commissioner’s order defendant entered into a contract of reinsurance and merger with a mentioned fraternal insurance Society of North Dakota; that on June 24, 1932, at a duly assembled meeting of defendant society, at which plaintiff was present and participated, the contract of reinsurance and merger was approved by a two-thirds vote of the members and also by said Commissioner; that in the contract it was provided inter alia that “the privilege of making and demanding certificate loans on the security of certificates theretofore issued by defendant should be suspended, . . . until such time as the Commissioners of Insurance of Iowa and North Dakota should .deem it feasible and good business to reinstate such privilege.”

We are of the opinion that the foregoing allegations disclose prima facie that defendant was justified in failing or refusing to make the cash loans in question. Although the prior by-laws and rules of defendant, as well as the certificate sued upon, provided for the making of the loans, still plaintiff had agreed, when he received his certificates, that his insurance, as well as his privilege of obtaining cash loans on the certificates, were subject, not only to the by-laws, rules and regulations of the Society then existing but also those that might thereafter be enacted. It sufficiently appears that the by-laws, rules and regulations, particularly as regards the privilege of certificate holders of receiving cash loans in certain stated amounts when applied for in writing, were so amended as to suspend for an indefinite time such privilege, because of defendant’s impaired financial condition. We understand that it is the law of this State that such amendments, under such a contract, would be binding upon a certificate holder in a fraternal insurance society. In Fullenwider v. Supreme Council Royal League, 180 Ill. 621, 626, it is said: “The contract requiring compliance with any by-laws that might thereafter be enacted, and the certificate being accepted with such a clause therein, there is no vested right of having the contract in the certificate remain unchanged, because the recognition of the power to make new by-laws is necessarily a recognition of the right to repeal or amend those theretofore made. While courts strongly disfavor any alteration or change in an insurance contract without the assent of the. insured, yet where the contract does reserve to the corporation the right, from time to time, to amend its rules or by-laws and binds the assured to compliance with such rules or by-laws, and such provision is expressly assented to in writing by the assured, it cannot be said that it would be an extraordinary power to make such change, and such a contract would not meet with disfavor from the courts.” (See, also, Steen v. Modern Woodmen, 296 Ill. 104, 110, 111; Pold v. North American Union, 261 Ill. 433, 436.) And, under the existing conditions as alleged at the times of such amendments to the by-laws or rules, we see nothing unreasonable or unjust in the amendments. Furthermore, it appears that the Insurance Commissioner of Iowa, acting under statutory authority, ordered defendant for reasons specifically stated, to suspend making any more certificate loans, and that if it violated such order the Commissioner had the power and authority to revoke defendant’s right to continue doing business as a fraternal insurance society. In Morgan v. Cook, 213 Ill. App. 172, 176, it is said: “The rule is that the performance of a contract is excused where there is a subsequent inability of performance by some action or under the authority of the government; in such cases the promisor is discharged.” (See also 9 Cyc., pp. 629-631.)

Inasmuch as it appears that each of plaintiff’s applications was accompanied by a “loan agreement,” signed by plaintiff on a form furnished by defendant, wherein plaintiff promised to repay the amount on or before a stated date “with interest at 6 per cent,” and as in plaintiff’s declaration it is not alleged that he suffered any special damage because of defendant’s failure or refusal to make the loans, defendant’s counsel further contend that plaintiff is not entitled to recover any sum in the present action, because a breach of a contract to make a loan, standing by itself, involves no legal damage. We agree with the contention.' In 1 Sutherland on Damages, 4th Ed., sec. 76, p. 274, it is said: “The utmost liability of a person who breaches his contract to loan money, in the absence of notice of special circumstances, is for the increased interest the other person was obliged to pay. ” In 3 Williston on Contracts, 1920 Ed., Sec. 1411, it is said: “Breach of a contract to lend money for whatever period at the current rate of interest, or at whatever rate of interest for no definite time, involves no legal damage, unless consequential damages are recoverable.” In 2 Sedgwick on Damages, 9th Ed., Sec. 622, it is said: “Upon breach of a contract to loan money, if no special damage is shown, the recovery is only nominal. For though by the contract plaintiff would receive the amount of the loan, it would be saddled with an obligation of exactly equal amount, so that the profit of the contract would be nothing. It is clear, however, that a contract to loan money at less than the current rate of interest would give the right to substantial damages equal to the difference between the current rate and the agreed rate. If the borrower could get the money elsewhere, no consequential damages can be recovered for breach, of the agreement, except the actual cost of obtaining another loan, which may be recovered.” (See, also, Avalon Construction Corp. v. Kirch Holding Co., 256 N. Y. 137, 141; Turpie v. Lowe, 114 Ind. 37, 53, 54.) In the Avalon case it is said: “When money is loaned . . ., and the debt is not paid when due, obviously the delay occasions the creditor nothing more than a temporary loss of the use of his money. For this loss, the law compensates the creditor with an award of no greater or other sum than legal interest. . . . Logically, a prospective borrower, whose contract for a loan has been breached, should stand in no better case. His money loss is likewise nothing else than the loss of its use for a limited period. . . . Reason compels, and all authority supports the conclusion that a breach of contract to make a loan, standing by itself, involves no legal damage.”

The above principles have been applied in a case involving the breach of an agreement by an insurance company to lend money to the insured upon his ms king; written application for the loan, agreeing to pay interest thereon, and assigning the policy to the company as collateral security, viz., New York Life Ins. Co. v. Pope, 139 Ky. 567. It appears from the court’s opinion that the policy, while in the insured’s possession, had been burned and destroyed, and the company’s secretary, by a statement attached to a true copy, had certified that the policy (as evidenced by the copy) was in force and had been since May 5,1894; that the policy provided that the company would “make advances as loans upon this policy at the 5th or any subsequent anniversary of the insurance” under certain conditions, among which were (a) that all premiums had been paid, (b) that the policy should be assigned to the company as collateral security for the loans, (c) that 5 per cent interest on the loans should be paid by the borrower, (d) that the loans should be for such time as the borrower might elect, not longer than the accumulation period, and (e) that the “aggregate amount of loans outstanding from the 6th to the 10th years, inclusive, should not exceed $212”; that shortly after the insured had paid the premium due on May 5, 1899, he made written application for a loan of $212, depositing with the company the copy of the policy, duly assigned, as collateral security; and that the company refused to make the loan. It further appears that the insured brought suit by petition for a rescission of the contract, and sought to recover all the premiums paid, with interest, and damages in addition, which were alleged to be “the difference between the cost to the insured of obtaining similar insurance at his advanced age over that required by his age when the contract was made ’ ’; that the trial court refused to adjudge the return of the premiums, but did adjudge damages in accordance with the plaintiff’s contention as follows:

“It is shown by the pleadings and evidence that the annual premium paid by plaintiff on said policy was $92.20, and that the amount of such premium he would be compelled to pay on a similar policy at the age of 51 years would be $121.74, and that the difference is $29.54, and that the amount per annum for a period of twenty years (the life of the policy sued upon) ' amounting to a total amount of $590.80, is the amount plaintiff ought to recover as damages herein. ’ ’

The trial court entered a judgment against the company in that sum. In reversing the judgment with directions to dismiss the petition, and after stating in substance that the only question involved was what was the proper measure of damages because of the company’s breach of the contract to make the loan of $212, the Supreme Court of Kentucky said in part (pp. 571, 572):

“Assuming that the copy of policy attached to the certificate of the company’s secretary, entitled the insured to all benefits given him by the original paper, the question then is, what was the measure of damages ' to which appellee was entitled? In contemplation of law, money is always in the market at the legal rate of interest. If it cannot be had from one, it may be from another. . . . The law has fixed its value incontestably. If it is due to be paid on a contract, and is not paid, the law likewise fixes the measure of damages for the breach; that is, the legal rate of interest. . . . But here the agreement was not to pay but to loan appellee $212. When loaned, appellee would have owed it to appellant, and been bound to repay it. It is not charged that appellee desired to apply the loan ' to any special use, of which appellant had notice, nor is it charged that appellee could not have procured the loan from other sources. . . . So, in this case, he would have had to pay for the money; that is, he would have had to repay the $212, and in addition the agreed rate of interest for the time used, not exceeding the lawful rate. Therefore, it would seem that if he could have got the same sum of money elsewhere on a loan, at 5 per cent interest, he was not damaged at all. If he was compelled to pay and did pay more interest than 5 per cent, then the difference, up to the legal rate, is the extent of his injury, and consequently must be the measure of his damage.”

But counsel for plaintiff contend that the judgment appealed from (i. e., for the aggregate amounts stated in the certificates which defendant failed or refused to loan) is proper. The argument is in substance that defendant’s several agreements were to make payments of said amounts (stated in each certificate as “cash loan”), and were not agreements for loans, “though so denominated.” We do not think there is any merit in the contention. The words used are “cash loan,” and “the word ‘loan’ implies an obligation to repay.” (38 Corpus Juris, sec. 6, p. 128; Herlihy v. Coney, 99 Maine 469, 471; Payne v. Gardiner, 29 N. Y. 146, 167; Omaha Nat. Bank v. Mutual Ben. Life Ins. Co., 81 Fed. 935, 938, 939.) And what is said in the case last cited is here particularly in point, viz., “The certificate designates it as a ‘loan,’ the amount bears ‘interest’ and it is made a lien on the policy until ‘paid.’ No doubt the company’s main reliance is upon this lien because of its effectiveness, but personal liability is not expressly or necessarily excluded.” Furthermore, it appears from the present certificates that one of the conditions mentioned therein, as to the making of the loans, is that the insured “executes a loan agreement, as per a form to be furnished by the Society,” and in defendant’s affidavit of merits it is alleged that, in the loan agreement executed by plaintiff when he applied for the $780 loan, he “promised and agreed to repay to defendant said sum of $780, on or before December 1, 1932, with interest at 6 per cent per annum.” Plaintiff’s counsel, in arguing their present contention, particularly rely upon certain holdings in Orleans Parish v. Neto York Life Ins. Co., 216 U. S. 517, in which case, on a bill filed by the insurance company to restrain the collection of certain taxes assessed against it as being contrary to the fourteenth amendment, the company had a decree in the lower court, and it appeared that the taxes were based upon an assessment against it for certain credits, amounting to $568,900, whereas it claimed it had no credits in the State of Louisiana. In affirming the decree the Supreme Court said in part (pp. 521, 522, italics ours):

“The so-called credits arise out of transactions denominated policy loans and premium lien note loans, which are explained at length by the judge below, but which may be summed up more shortly here. When the plaintiff’s policies have run a certain length of time and the premiums have been paid as due, the plaintiff becomes bound ultimately to pay what is called their reserve value, whether the payment of premiums is kept up or not;-and this reserve value increases as the payments of premiums go on. A policy holder desiring to keep his policy on foot and yet to profit by the reserve value that it has acquired, may be allowed at the plaintiff’s discretion .to receive a sum not exceeding that present value, on the terms that on the settlement of any claim under the policy the sum so received shall be deducted with interest (the interest representing what it is estimated that the sum would have earned if retained by the plaintiff); and that on failure to pay any premium or the above mentioned interest, the sum received shall be deducted from the reserve value at once.

“This is called a loan. It is represented by what is called a note, which contains a promise to pay the money. But as the plaintiff never advances more than it already is absolutely bound for under the policy, it has no interest in creating a personal liability, and therefore the contract on the face of the note goes on to provide that if the note is not paid when due it shall be extinguished automatically by the counter credit for what we have called the reserve value of the policy. In short, the claim of the policy holder on the one side and of the company on the other are brought into an account current by the very act that creates the latter. The so-called liability of the policy holder never exists as a personal liability, it never is a debt, but is merely a deduction in account from the sum that the plaintiff ultimately must pay. In settling that account interest will be computed on the item for the reason, that we have mentioned; but the item never could be sued for, any more than any other single item of a mutual account that always shows a balance against the wonld-be plaintiff. In form it subsists as an item until the settlement, because interest must be charged on it. In substance, it is extinct from the beginning, because, as was said by the judge below, it is a payment, not a loan. ’ ’

Plaintiff’s counsel contend that the above holdings sustain their contention in substance that the loan values, mentioned in the certificates in question, represent amounts now due from defendant because of defendant’s refusal to make the loans requested, and this notwithstanding the fact that in plaintiff’s applications for the loans he executed a “loan agreement,” wherein he promised to repay the loans, with six per cent interest, at a certain stated date. We cannot agree with the contention. The italicized portions of the Supreme Court’s' opinion disclose, we think, a marked difference between the terms of the contract in that case and the contract in the present case, and that said opinion cannot be held to be an authority sustaining counsel’s said contention.

Our conclusion is that the judgment appealed from should be reversed and the cause remanded, and such will be the order.

Reversed and remanded.

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


author: Mr. Justice Q-ridley

text:
    Charles F. Rupp, Appellee, v. Walgreen Company, Appellant.
    Gen. No. 36,213.
    Opinion filed April 11, 1933.
    Shanner & Shanner and Latimer, Donovan & Brown, for appellant.
    Boyal W. Irwin, for appellee.
   Mr. Justice Q-ridley

delivered the opinion of the court.

In an action for damages for personal injuries, received by plaintiff in a motorcycle accident on Sunday afternoon, August 3, 1930, on Ashland avenue, near its intersection with Sunnyside avenue, Chicago, there was a trial before a jury in June, 1932, resulting in a verdict finding defendant guilty and assessing plaintiff’s damages at $20,000. On July 13, 1932, judgment was entered against defendant in that sum and the present appeal followed.

Plaintiff’s declaration consisted of three counts. In the first he alleged in substance that defendant is a duly organized corporation and on August 3, 1930, by its servants and employees, was engaged in the sale and distribution from its various retail stores in Chicago of drugs and other articles; that one of its servants in one store had been hired to do various kinds of work, including that of delivering drugs and other articles to customers in Chicago by means of a certain motorcycle; that plaintiff, in the exercise of due carp for his own safety, was lawfully upon a public highway, known as Ashland avenue, near its intersection with Sunnyside avenue; and that defendant by its said servant then and there so negligently operated the motorcycle that it violently ran into, struck and threw plaintiff down upon the pavement, causing him serious and permanent injuries, etc. In the second and third counts there are similar allegations, except that in the second the negligence charged is that of propelling the motorcycle at a high and dangerous rate of speed, and except that in the third count the negligence charged is that of propelling the motorcycle at an excessive speed without giving notice or warning of its approach.

To the declaration defendant filed a plea of the general issue and three special pleas, in substance, (a) that at the time of the accident it did not employ the said servant to deliver or transport its merchandise by means of the motorcycle; (b) that at said time it did not operate or control the motorcycle; and (c) that at said time the driver of the motorcycle was not its servant.

Upon the trial, at the close of plaintiff’s evidence and again at the close of all the evidence, defendant’s motions for a directed verdict in its favor severally were denied. The main issue was whether at the time of the accident the driver of the motorcycle was acting in his master’s (defendant’s) business and within the scope of his employment. On this issue the following undisputed facts were disclosed from the testimony: On and prior to the day mentioned, defendant maintained and operated one of its drug stores at 3959-North Ashland avenue, Chicago, and Albert Bower, about 19 years of age, was one of its employees at that store. It was his duty to deliver drugs and other articles purchased by defendant’s customers to their homes. He also at times assisted at the soda fountain and did other work within the store when requested. During a period of his employment he had used with defendant’s consent his own bicycle to make deliveries to the customers. Several months before the accident his bicycle was stolen, and for a time he made deliveries by walking or by using street cars, and, if the latter, defendant paid to him the street car fare. About a month before the accident he purchased with his own money a motorcycle and used it with defendant’s consent in making the deliveries, just as he formerly had done with the bicycle. On week days he worked at the store from 6 o’clock p. m. until midnight. On Sundays his employment commenced at 12 o’clock noon, and he worked until 12 o’clock, midnight, with the exception that he was allowed an hour off, usually from 6 to 7 o’clock p. m., for the purpose of procuring his evening meal, or doing whatever he wished to do for himself. His home was about three miles from the store, and during said hour he usually went there for his evening meal, traveling to the home and back again to the store on his motorcycle. He was paid by defendant at the rate of 20 cents an hour while making deliveries or doing other work' in the store, but was not paid anything for the hour that he was off duty on Sunday evenings. During said hour on the evening of August 3, 1930, while riding on his motorcycle to his home, by the usual route and for the sole purpose of getting his evening meal, he collided with plaintiff, a pedestrian on a street crossing in Ashland avenue, whereby plaintiff suffered the injuries complained of.

In Nelson v. Stutz Chicago Factory Branch, 341 Ill. 387, 392, 393, it is said:

“The liability of the owner of an automobile for damages occasioned through its negligent operation by another depends upon the principle of agency. To enable the person injured to recover from its owner damages caused by the negligent operation of an automobile, the plaintiff must prove that the operation was by the owner, or by his servant in the owner’s business and by the owner’s authority. The general rule is, that one who is injured by another’s negligence must pursue his remedy against the person whose negligence caused the injury. Where, however, the relation of master and servant exists between the person guilty of the negligence and another sought to be held for the resulting damages, the negligence of the servant may be imputed to the master, and he may be held liable for the resulting damages if the servant guilty of the negligence was at the time acting in the master’s business and within the scope of his employment. Outside the scope of his employment the servant is as much a stranger to his master as any third person.”

In Johanson v. Johnston Printing Co., 263 Ill. 236, 240, it is said:

“Outside of the scope of his employment the servant is as much a stranger to his master as any third person, and an act of the servant not done in the execution of services for which he was engaged cannot be regarded as the act of the master. If the servant step aside from his master’s business for some purpose wholly disconnected with his employment the relation of master and servant is suspended. The act of the servant during such interval is not to be charged to his master. This doctrine is established by substantially all of the authorities.” (Citing cases.)

In Lohr v. Barkmann Cartage Co., 335 Ill. 335, the defendant was sued for damages for personal injuries caused by the negligent operation of an automobile truck which it owned and which was being driven by a servant of the defendant, named Sehwinnen. The defense was that at the time of the accident Sehwinnen was not acting within the scope of his employment and was therefore not the defendant’s servant. The undisputed evidence disclosed that Sehwinnen had been ordered to take the truck to the defendant’s garage, but that, instead of obeying the order, he went off on a frolic of his own, and at the time of the accident was more than four miles from the garage and traveling in the opposite direction. Plaintiff’s evidence disclosed defendant’s ownership of the truck and that the relation of master and servant existed between defendant and Sehwinnen. After defendant’s evidence had shown without contradiction that Schwinnen had disregarded defendant’s instructions to take the truck to the garage and that at the time of the accident he was operating it not for his master’s business and not within the scope of his employment, defendant at the close of all the evidence moved for a directed verdict in its favor, but the motion was denied, and plaintiff had a verdict and judgment for $4,200. The Appellate Court affirmed the judgment. In reversing the judgment without remandment our Supreme Court held that the trial court had erred in denying defendant’s motion for a directed verdict in its favor, and said (p. 340):

“While it is admitted by plaintiff in error (defendant) that Sehwinnen on that day was its agent and the presumption exists that the agency having been established continues, . . . such presumption is not evidence. Presumptions are never indulged -where established facts exist.- They supply the place of facts. When evidence is produced which is contrary to the presumption the presumption vanishes entirely. . . . Whether Sehwinnen was in plaintiff in error’s employ at the time of the accident depends upon the facts surrounding that occurrence.”

In Arkin v. Page, 287 Ill. 420, 422, it is said:

“The owner of an automobile is not liable for an injury occasioned by the negligent use of the machine by his servant if the servant was at the time at liberty from the service of his master and not engaged in doing his master’s business but was pursuing his own interests exclusively. ’ ’

In Pearce v. Industrial Commission, 299 Ill. 161, a case arising under the Illinois Workmen’s Compensation Act, Cahill’s St. ch. 48, If 201 et seq., it was held that where the employees of a certain employer voluntarily make an arrangement among themselves to cook their lunch and eat it on the employer’s premises without his direction or sanction, an injury received by one of the employees, shortly before the noon hour and while he was returning on a public street after getting supplies for the meal, did not arise out of the employment. In reversing a judgment of the circuit court, which affirmed an award of the Industrial Commission in favor of said employee who had received the injury, our Supreme Court said (p. 164):

“Ordinarily, where the lunch period is not subject to the employer’s control or restricted in any way and the employee is free to go where he will at that time, if he is injured on the public street, off the premises of the employer, the authorities hold that the injury does not arise out of the employment. (Citing authorities.) So far as the record shows, the place where defendant in error fell had no relation to nor was any part of the surroundings of his place of work but was a block or more away on a public street. ’ ’

In Bloom v. Krueger, 182 Wis. 29, it appears that defendant’s employee, named Parris, during the lunch hour, used defendant’s motor truck with its express or implied consent in going to his home for lunch, and that on returning to work in the truck he so negligently drove the truck as to collide with the plaintiff, injuring him; that the main issue was whether in using the truck he did so within the scope of his employment with defendant and in its business; and that in the trial court the plaintiff had a verdict and judgment. In reversing the judgment and remanding the cause with directions to the trial court to dismiss plaintiff’s complaint with costs, the Supreme Court of Wisconsin said (pp. 31, 32):

“During the lunch period the relationship of master and servant between the defendant and Parris was suspended, and the employee was at liberty to utilize his time solely for his own individual benefit and purposes. In other words, the lunch time was the employee’s time and not the employer’s. . . . The controlling fact in the case, which stands out foremost above all others, consists of the employee’s use of the truck solely for the purpose of enabling him to obtain his noon-day meal. Assuming that the employer either expressly or impliedly consented to the use of his truck for this purpose, such use was and must be deemed to have been solely for the employee’s benefit during a period of time while the relationship of master and servant was suspended. ... It is therefore held that the truck in question was not used by the servant within the scope of his employment or for the purpose of facilitating the master’s business.”

In Reilly v. Connable, 214 N. Y. 586, an action to recover damages for personal injuries to plaintiff, received while riding a bicycle, in a collision between the bicycle and an automobile owned by defendant and driven by defendant’s chauffeur, it appears that at the time of the collision the chauffeur was using the automobile to go to market for himself; that he had frequently used it in procuring supplies and doing errands for himself, but without asking for or receiving the express consent of defendant; that defendant on the occasion in question did not know that he was going to use the automobile; and that upon the trial plaintiff had a verdict and judgment. In reversing the judgment the reviewing court said (p. 590):

“The fact that the automobile was the defendant’s did not make him liable. If the chauffeur was doing the defendant’s business which he was employed to do, the defendant would have been equally liable had the chauffeur while walking or running or riding a bicycle negligently have collided with the plaintiff to her injury. The fact that the chauffeur caused the injuries during the period of his employment does not make the defendant liable. If the employee in doing any act breaks the connection between himself and his employer, the act done under those circumstances is not that of the employer. Nor would the defendant’s permission or acquiescence in the use by his chauffeur for the personal business or pleasure of the chauffeur make the defendant liable. The permission of defendant to the chauffeur to use the automobile for purposes personal to the chauffeur and in which the defendant had no interest did not make him liable to the plaintiff. We hold that the act of the chauffeur in going to the market for the meat was not for the defendant or within the scope of the employment of the chauffeur and the defendant is not liable for Ms negligence.”

In Adams v. Tuxedo Land Co., 92 Cal. App. 266, 267 Pac. 926, 927, it was held that in an action for injuries sustained by plaintiff in a collision, while defendant’s employee was driving his own automobile to a place for the purpose of there eating his lunch, defendant was not liable to plaintiff, because said employee then was using the automobile for his own purposes and not in his employer’s business. To the same effect is the decision in Helm v. Bagley, 113 Cal. App. 602, 298 Pac. 826, 827, where the court said:

“We think it is clear from the evidence in this case that Bagley was not acting* for his employer and within the scope of his employment at the time of the accident in returning* to his own home for his dinner. He was in his own automobile and on his own business, which in no manner pertained to the business of his' employer. He had stepped aside from his employer’s business and had entered upon the performance of an independent purpose of his own.”

The principles of law, enunciated by the courts of review of Illinois and other States as above shown, are in accordance with the general current of authority in this country, and in this connection the following additional cases may be cited: Calhoon v. D. C. & E. Mining Co., 202 Mo. App. 564, 571; Taylor v. Binswanger & Co., 130 Va. 545, 546; Hill v. Haynes, 204 Mich. 536, 539; Vallavanti v. Armour & Co., 260 Mass. 417, 420; Kyle v. Postal Telegraph-Cable Co., 118 Kan. 300, 301.

In view of the main issue in the present case as above stated, and after considering the undisputed evidence bearing upon that issue and the decisions and holdings in the adjudicated cases above outlined, we are of the opinion that the trial court erred as a matter of law in not allowing defendant’s motion, made at the close of all the evidence, to instruct the jury to return a verdict in defendant’s favor, and, after a contrary verdict had been returned in plaintiff’s favor, in entering the judgment appealed from. We think it is clear from the undisputed evidence that defendant is not legally^ liable to respond in damages to plaintiff for the injuries he received in the accident in question. Accordingly, the judgment of the circuit court of July 13, 1932, is reversed.

Reversed.

Soanlan, P. J., and Sullivan, J., concur.