text:
    James Reilly, Minor, by His Mother and Next Friend, Elma Reilly, and Robert Droege, Minor, by His Mother and Next Friend, Harriet Droege, Appellees, v. Peterson Furniture Company, Appellant, and Arthur Henke, Separate Appellant.
    Gen. Nos. 41,836, 41,898.

      Heard in the first division of this court for the first district at the October term, 1941.
    Opinion filed March 23, 1942.
    John A. Bloomingston, of Chicago, for certain appellant.
    Charles J. Morgan, of Chicago, for certain other appellant.
    F. P. Conlon, L. L. Silverman and Marion J. Hannigan, all of Chicago, for appellees.
   Mr. Justice O’Connor

delivered the opinion of the court.

About 9:30 on the evening of July 28, 1939, plaintiff Droege, about 16 years of age, was driving his motorcycle east in Addison street, Chicago, and plaintiff James Reilly, about 18 years old, was seated behind him. The motorcycle collided with a west bound automobile driven by defendant Henke, as it was passing to the south of a westbound motorbus in Addison street. Plaintiffs claim Henke at the time was on business for defendant, The Peterson Furniture Company, a corporation. The two boys were injured and the instant case was brought by their mothers and next friends. There was a jury trial and a verdict and judgment in Droege’s favor for $5,000, a verdict and judgment in Reilly’s favor for $250, from which defendants prosecute separate appeals.

Plaintiffs’ theory of the case is that Arthur Henke, at the time of the collision, was engaged in the course of his employment as defendant Peterson Furniture Company’s employee and that he negligently drove his automobile south of the center line of the pavement in Addison street, as a result of which plaintiffs were injured. The theory of defendant Furniture Company is that Henke “was not engaged in the course of his employment” at the time of the accident; was not at that time acting as its agent and that plaintiffs ’ eastbound motorcycle was negligently driven north of the center line of the roadway in Addison street.

The evidence is to the effect that Henke was the owner of the automobile which he was driving at the time and which he used in his business as an employee of The Peterson Furniture Company and for his own pleasure. Henke, called as an adverse witness under § 60 of the Civil Practice Act [Jones Ill. Stats. Ann. 104.060], testified he started to work for The Peterson Furniture Company in March, 1939, as a collector and was still employed there at the time of the trial, December 12, 1940; that his job was to go about the city making collections for the furniture company; that when he first went to work another collector accompanied him to show him how the work should be done; that he used his own automobile all the time; that he was paid a salary and “it was agreed that I was to pay the expenses of the car out of that salary. ’ ’ That he reported every morning at 1026 Belmont avenue, the furniture company’s place of business and Mr. Groin assigned work for him to do; that he would leave the furniture company’s place of business at 9 a.m. on his work which took him to various parts of the city and he was not required to return to the office at the end of the day; that when he left the office in the morning he had a list of accounts given to him for collection; that when he made a collection he would give a receipt in the name of the furniture company, taken from a receipt book which he carried; that on the night of the accident he had a list of cards and receipt books belonging to the furniture company which he received on the morning of July 28; that he did not return to the office that evening; that sometime before he had a conversation either with Mr. G-oin or Mr. Smith, his superiors of the furniture company, relative to making collections at night and was told if he was not able to see a customer in the daytime he should make a call on him in the evening; that July 28 he called to collect a bill from Grizelle, one of the furniture company’s customers who lived at 1901 Henderson street, Chicago, but was unable to see him; that on that evening he came home at the usual time, had dinner and his wife asked him to go with her and their child to the home of Henke’s mother. That he told her he had some work to do, that she should go with the boy and he would pick her up later at his mother’s home; that she went on the street car and he took the automobile and went to make a collection from Grizelle but he was not home; that he then started back to pick up his wife and child at his mother’s home.

The evidence further shows Henke lived at 4118 West Potomac avenue; that in going to call on the customer, Grizelle, he drove east on Potomac to Pulaski Road, which is 4000 west, then north on Pulaski Road to North avenue, which is 1600 north, then east on North avenue to Damen avenue, which is 2000 west, then north on Damen to Henderson, which is 3300 north, and east on Henderson about a half block to Grizelle’s home. Henke’s mother lived at 3415 North Kilpatrick street, which is a north and south street at 4700 west. Addison street is an east and west through street north at 3600 and the accident happened near Francisco avenue, which is about 2900 west. There is evidence that Henke was not directed by his superiors to make the night call but counsel for the furniture company say that question is “of no importance” because it appears without dispute that Henke had made the call, and finding no one home had started elsewhere when the collision occurred.

Counsel for the furniture company say that when Henke left the customer’s home on Henderson street, he started back to his home at 4118 Potomac street, having forgotten he was to go to his mother’s home on North Kilpatrick street and when he was part way towards his home he turned and went to pick up his wife at his mother’s home. It is contended the court should have directed a verdict, as requested, in favor of the furniture company at the close of all the evidence because the undisputed evidence showed that at the time of the accident Henke was not engaged in the course of his employment but was on a mission of his own, and authorities are cited tending to sustain defendants’ contention. The question whether Henke at the time was in the course of his employment or was on a mission of his own is not free from difficulty but we think it was a question for the jury to decide. Bloodgood v. Whitney, 235 N. Y. 110; Moore v. Rosenmond, 238 N. Y. 356, opinion by Judge Pound; Kavale v. Morton Salt Co., 242 Ill. App. 205, affirmed in 329. Ill. 445; Wagner v. Chicago Motor Coach Co., 288 Ill. App. 402. It is the law that where a difference of opinion might legitimately be drawn from the evidence on the question of negligence, the case must be submitted to the jury. It is for the jury to draw the inference, Chicago & N. W. Ry. Co. v. Hansen, 166 Ill. 623; Moore v. Rosenmond, 238 N. Y. 356; Kavale v. Morton Salt Co., 242 Ill. App. 205; Norris v. Illinois Cent. R. Co., 88 Ill. App. 614; Richmond & Danville R. Co. v. Powers, 149 U. S. 43; Gunning v. Cooley, 281 U. S. 90; Denny v. Goldblatt Bros., 298 Ill. App. 325; Best v. District of Columbia, 291 U. S. 411. As stated by the United States Supreme Court in Union Pac. R. Co. v. Huxoll, 245 U. S. 535 in a negligence case demonstration is not required.

In the Best case a child 5 years of age fell through a hole in the wharf, was drowned, and suit was brought on the ground that the death resulted from the negligence of the District of Columbia. A verdict was directed at the close of the opening statement of counsel for plaintiff. This was affirmed by the United States Circuit Court of Appeals, 66 F. (2d).797 and the Supreme Court of the United States granted certiorari where the judgment was reversed. Mr. Chief Justice Hughes, in delivering the opinion of the court said: “The power of the court to act upon facts conceded by counsel is as plain as its power to act upon evidence produced. Oscanyan v. Arms Co., 103 U. S. 261, 263. . . . But the power is not properly exercised if the opening statement leaves doubt as to the facts or permits conflicting inferences. Where uncertainty arises either from a conflict of testimony or because, the facts being undisputed, fair-minded men may honestly draw different conclusions from them, the question is not one of law but of fact to be settled by the jury. Richmond & Danville R. Co. v. Powers, 149 U. S. 43, 45; Texas & Pac. Ry. Co. v. Harvey, 228 U. S. 319, 324; Gunning v. Cooley, 281 U. S. 90, 94.” The fact that in Illinois the practice does not obtain in directing a verdict at the close of the opening statement of plaintiffs’ counsel (Pietsch v. Pietsch, 245 Ill. 454; Sun Oil Co. v. Garren, 261 Ill. App. 513) does not change the substantive rule of law announced in the opinion by the Chief Justice.

In the instant case we think different inferences might be drawn from the evidence as to whether Henke, at the time of the accident, was in the course of his employment or on a mission of his own and therefore the question was for the jury.

(2) We are further of opinion that whether plaintiffs were in the exercise of ordinary care for their own safety and whether Henke was guilty of negligence which resulted in the accident were also questions for the jury. It is clear we would not be warranted in disturbing the verdict of the jury, approved as it was by the trial judge, on the ground that the verdict and judgment are against the manifest weight of the evidence.

Counsel for the furniture company also contend the court erred in giving the following instruction at the request of plaintiffs: “The court instructs you that when a tort or wrong is committed by an agent or employe in the course of his employment and while pursuing his employer’s business, the employer will be liable for any damages resulting from such tort or wrongful act, although it is done without the employer’s knowledge or consent, unless the wrongful act is a wilful departure from such employment or business.” And the argument of counsel is that the jury would be justified in bringing in a verdict for the plaintiffs although they might also believe plaintiffs were guilty of negligence which contributed to the injury.

We think the instruction is not subject to the objection. It is abstract and does not direct a verdict. The identical instruction was held not to be erroneous in Smith v. Taggart, 21 Ill. App. 538, in an opinion by Presiding Justice Baker, who shortly thereafter was elected to the Supreme Court of this State where he continued for many years.

By other instructions the jury were told plaintiffs could not recover unless they were in the exercise of ordinary care for their own safety and that the jury could not find for plaintiffs if they found Henke was in the exercise of due care.

In the separate appeal taken by defendant, Arthur Henke, separate briefs have been filed and his counsel contends the verdict and judgment in plaintiff’s favor against Henke was against the manifest weight of the evidence and that plaintiffs were guilty of contributory negligence as a matter of fact and as a matter of law. From what we have said neither of these contentions can be sustained.

We might add there is an apparent clerical error in entering the judgments on the verdicts. The verdict in favor of plaintiff Reilly was for $250 and that in favor of plaintiff Droege $5,000. The verdicts were returned December 18, 1940, and on the same day the court entered them of record. Afterward motions for a new trial were filed by each defendant and February 14,1941, they were overruled and the order recites that judgment was entered on the verdicts, $5,000 in favor of Reilly and $250 in favor of Droege. It is clear the judgments should have followed the verdicts and there was a clerical error in entering the judgments as ordered by the court.

The judgments of the Superior court of Cook county are affirmed.

Judgments affirmed.

McStjrely, P. J., and Matchett, J., concur.


source: Caselaw Access Project

author: Mr. Justice O’Connor

license: Public Domain

text:
    Ella Gibson Pank, Individually and as Cotrustee Under Last Will and Testament of Christopher Waller Pank, Deceased, et al., Appellants, v. Chicago Title and Trust Company, Appellee.
    Gen. No. 41,849.

      Heard in the first division of this court for the first district at the October term, 1941.
    Opinion filed March 23, 1942.
    Ross & Watts, of Chicago, for appellants; Wadsworth Watts and Keith I. Parsons, both of Chicago, of counsel.
    Thomas L. Marshall, Samuel M. Mitchell, Harold L. Reeve and John Mann, all of Chicago, for appellee; Bell, Boyd & Marshall, of Chicago, of counsel.
   Mr. Justice O’Connor

delivered the opinion of the court.

September 23, 1938, plaintiffs filed their complaint in chancery alleging that Ella Gibson Pank, plaintiff, is a co-trustee with defendant, Chicago Title and Trust Company, of a testamentary trust created by the last will and testament of Christopher Waller Pank,. her deceased husband, the other plaintiffs being the children of plaintiff, Ella Gibson Pank and the deceased. The complaint charged deféndant with a breach of duty in carrying out the trust and prayed that it be required to account and to pay personally to the trustees of the trust estate what amount should be found due; that defendant be removed as one of the trustees and a successor appointed.

Defendant filed its answer denying it had been guilty of any breach of duty. Sometime thereafter, defendant filed its counter claim in which it alleged there was in the trust estate $19,331.29 in cash which was uninvested and that plaintiff, Mrs. Pank, its - co-trustee failed to carry out her duties as such so that defendant whs unable to comply with the instructions of the '.testator as. to the investment of the money. The prayer was that the court advise and.direct it as to its. duties. . The case was heard by the chancellor who found in .favor or defendant, a decree was entered dismissing the complaint for want of equity, and plaintiffs appeal.

The record discloses that January 23,1922, Christopher Waller Pank executed his will. He died June 21, 1926. The will was admitted to probate in the Probate court of Cook county July 27, 1926, and the estate closed September 30,1927. Both trustees qualified and proceeded to carry out the trust. The will, after making provision for the payment of his debts and after leaving certain of his property to his wife designated her and the Chicago Title and Trust Company co-trustees. The income of the trust estate was to be paid to the widow and after her death to their children, etc. The material part of the will involved in this appeal provides: “Said Trustees shall convert said trust estate into cash as rapidly as the same can be done after my decease and without unnecessary sacrifice, providing, however, that said Trustees shall be authorized to retain as a part of said estate, so long as they may see fit to do so, any first mortgage real estate securities and any shares of capital stock in the MacWhyte Company, Fairbanks Morse & Co., and in any corporation subsidiary to or affiliated with the said Fairbanks, Morse & Co., which I may own at the time of my death. . . . Said trustees are directed to invest such part of said trust estate as may from time to time be converted into cash, in first mortgage real estate securities.”

At the time of his death, the testator held 120 shares of 7 per cent cumulative preferred stock and 395 shares of common stock in Fairbanks, Morse & Company and 104 shares of preferred and 3,000 of common stock «in the MacWTiyte Company.

The stockholders of Fairbanks, Morse & Co. amended its charter and offered to the shareholders of the 7 per cent preferred stock share for share, one share of new 6 per cent convertible preferred, one share of common and $2 in cash. The offer was accepted by the stockholders including the trustees of the trust estate. They received in exchange for the 120 shares of 7 per cent preferred, 120 shares of 6 per cent cumulative convertible preferred, 120 shares of common and $240 in cash. The common stock and the cash represented what was due for dividends then in arrears. The 6 per cent convertible preferred might be converted into common stock on the basis of 3 shares of common for one of preferred until February 28, 1937; 2% shares of common for one of preferred after February 28,1937, and until February 28, 1939, and 2 shares of common for one share of preferred after February 28,1939, and until February 28, 1941, when the conversion rights expired.

March 1, 1937, defendant the Chicago Title & Trust Co. as trustee, caused the 120 shares of 6 per cent cumulative convertible preferred to be exchanged for 360 shares of common of the Fairbanks, Morse & Company. Plaintiffs contend this exchange was made without consulting Mrs. Pank, the co-trustee, was a breach of trust on the part of defendant, the other trustee, and as a result of such breach, plaintiffs are entitled to recover “the difference between the value of the preferred stock at the time it was converted and the proceeds realized from the sale of the common stock, ’ ’ which was sold by agreement without prejudice June 21 and 22,1938.

Plaintiffs ’ theory of the case as stated by their counsel is that the exchange of the 120 shares of preferred for the 360 shares of common stock without the consent of Mrs. Pank “was a breach of trust on the part of the Chicago Title and Trust Company for two reasons: first, the common stock was an unauthorized investment under the terms of the trust pursuant to which the Chicago Title & Trust Company was acting, and second, regardless of the nature of the securities acquired in exchange for the preferred stock, the Chicago Title and Trust Company had no power or authority to act in the matter unless its co-trustee joined in the action” and therefore the Chicago Title & Trust Co. is liable to the trust estate for the amount of such loss. On the other side, defendant’s theory is (1) that the will authorized the trustees to retain the testator’s interest in Fairbanks, Morse & Co. and the MacWhyte Co., “not merely the particular certificates held by the testator but meant the substance of those interests.” That changes had been made in the form of the holdings in these two companies, in the Fairbanks, Morse & Co. in 1935 and in 1937, “In substance, there was continued retention of the interests in these companies.” (2) “That the corporate trustee, the custodian of the trust assets, is entitled to take reasonable action during the absence from the country of its co-trustee, for the preservation of trust assets pursuant to policies of retention of assets clearly laid down by the two trustees jointly.” And since Mrs. Pank was on a Caribbean trip at the time the conversion of the stock should be made it had the right and it was its duty to make the exchange to prevent loss.

The only question involved on this appeal is whether defendant is liable because of its exchange of the 120 shares of 6 per cent preferred for 360 shares of common stock of the Fairbanks, Morse Co. Other charges made in the complaint, which we have not mentioned, and defendant’s counter claim have apparently been abandoned.

The evidence shows that Mr. Pank, the testator, had been employed by Fairbanks, Morse & Co. from the time he was about 17 years of age and continued in its employ for about 39 years. He was vice president and director of sales of the company but resigned two years before he died, at which time he was 58. The assets turned over to the trustees by the executor were about $45,000 in cash; notes and bonds aggregating $13,500; 120 shares of Fairbanks, Morse & Co. 7 per cent preferred; 395 shares of common stock in the same company; 104 shares of MacWhyte Company preferred and 3,000 shares of common. Afterward the trustee received for the 120 shares of 7 per cent preferred Fairbanks, Morse & Co. stock, 120 shares of 6 per cent convertible preferred, 120 shares of common and $240. March 1, 1937, the 120 shares of preferred were exchanged for 360 shares of common, so that the trustees held 875 shares of the common stock of Fairbanks, Morse & Co. — 395 of these shares were held by Mr. Pank at the time of his death and the 480 were the result óf the conversion.

Charles Carroll, an assistant trust officer of the Chi-cage Title & Trust Company, who had most to do with the handling of the trust estate, called by plaintiffs under § 60 of the Civil Practice Act [Jones Ill. Stats. Ann. 104.060], testified he had been connected with the Trust Company for 16% years, first as a clerk in the Trust Department and since January, 1926, as an Assistant Trust Officer; that he was a member of the Illinois bar; that Chester R. Davis was vice president of the Trust Company and head of the Trust Division. He then testified as to the manner in which they conducted trusts such as the one involved in the instant case; that members of the investment committee were Mr. Davis, Judge Hoban and Mr. W. V. Carroll, all of whom had been with the Trust Company for a number of years; that the Title & Trust Company had a law department and a trust department counsel and they frequently consulted together; that the preferred and common stock of Fairbanks, Morse & Co. was listed on the New York stock exchange; that some time between 1935 and February, 1937, the Trust Company, through its proper representatives, came to the conclusion it was advisable and desirable to convert the 6 per cent preferred into common stock and about February 27, 1937, stock certificates were endorsed by the Trust Company in the name of both trustees, forwarded for exchange and new shares were issued, the certificates running to Mrs. Pank and the Trust Company as trustees of the estate. The witness further testified the Trust Company had not requested Mrs. Pank to endorse the certificates; that several months before February 27, the Trust Company concluded to convert while they could receive 3 shares for one. The matter had been discussed a number of times with Vice President Carroll, Judge Hob an, Mr. Meloy, Mr. Stevens and Mr. Davis and they all agreed it was advisable that the conversion should be made; that he could not recall he had specifically discussed the matter with Mrs. Pank at any time prior to March 1, 1937, and that he had not written her on this subject; that on a number of occasions he talked to Mrs. Pank and wanted to sell the Fairbanks, Morse and MacWhyte stock but she did not want this done. “She never wanted to sell either the MacWhyte or the Fairbanks, Morse” stock; that at the time of the conversion the Trust Company had not determined that it was desirable to liquidate the stock for cash. “We couldn’t get Mrs. Pank’s consent. She never wanted to sell. She had established the policy of retaining an interest in Fairbanks, Morse” and therefore the Trust Company had no choice but to convert; that if the Trust Company had been the sole trustee they would have sold the preferred stock and a substantial portion of the common stock of the Fairbanks, Morse & Co. but Mrs. Pank would not consent to the sale of either the preferred or the common; that he had a number of conversations with Mrs. Pank, mostly at his office but sometimes over the telephone; that he could not recall having talked with Mr. Ashcraft whom the testator mentioned in the will as an attorney he suggested the trustees might consult concerning any sale or investment. That defendant’s idea was that the common stock which they had received March 1, should be sold as soon as they received Mrs. Pank’s consent. That their attitude before and after the conversion was to sell a portion of Fairbanks, Morse stock; that as Mrs. Pank disagreed with them they considered the desirability of filing a bill for instructions but had decided not to do so, but on the contrary tried to get along pleasantly with her. That from 1926 to 1937 the income from the two stocks ran about $55,000 as against about $27,000 income received from mortgages and therefore they did not feel that “we were unsafely abiding by our co-trustee and life-tenants, particularly since it seemed to be the desire of Miss Phyllis Pank, the daughter whom I called, to largely follow what her mother wanted to do.” That between the time of the conversion, March 1, and the middle of September following, he did not write a letter to Mrs. Pank advising her of the conversion; that he talked to Mrs. Pank about the sale of the MacWhyte stock over the telephone in March or April, 1937, and at that time “I mentioned to her our recommendation that we sell 575 shares of Fairbanks, Morse stock.” The evidence shows Mrs. Pank had left Chicago about February 16, 1937, on a Caribbean trip and did not return until about March 10.

The evidence further shows .the Trust Company had from time to time sent the income to Mrs. Pank as the will provided and March 4, 1937, gave her their check for $255.23 with voucher attached which showed this was a dividend of 50 cents per share on 515 shares of Fairbanks, Morse & Co. stock less a small Wisconsin tax. The check was deposited and the voucher signed by Mrs. Pank. Again June 3, 1937, the Trust Company sent its check to Mrs. Pank for $433.43 together with an attached voucher showing it represented a dividend on 360 shares of Fairbanks, Morse & Co. common stock and another item on 515 shares of the same common stock. This check was deposited and the voucher signed by Mrs. Pank. September 2, 1937, the Trust Company again sent its check to Mrs. Pank for $433.43 with voucher, as a dividend of 25 cents per share on 875 shares of Fairbanks, Morse & Co. stock and a dividend of 25 cents extra per share. This check was deposited and the voucher signed by Mrs. Pank.

The evidence further shows the Trust Company submitted tc Mrs. Pank monthly statements of the Pank trust, 20 of which are in the record covering a period from March 1st, 1936 to July 1st, 1937 and later. They show among other things, the dividends from the Fairbanks, Morse stock and the number of shares, some of which showed the change in the number of shares after the exchange.

September 22, 1937, Mr. Carroll wrote Mrs. Pank that on March 1, when the conversion was made, the bid price for the preferred was $155 a share and the common sold at 62% a share; that if they had held the 120 shares of preferred it would have been worth $18,600, whereas if it was converted into 360 shares of common stock it would be worth $22,500; that to enjoy this profit they considered it desirable to convert, which was done; that the bid price of the preferred was now about 102 and the common 44, and that if the 360 shares of common were sold and 120 shares of preferred bought the conversion of March 1 would result in a profit to the estate of about $3,600. The letter further stated the treasurer of the Fairbanks, Morse Company had advised that at that time there were only about 11,000 shares of preferred stock outstanding and that it might take some little time to pick up the 120 shares. The letter continues “I shall appreciate it if you will consider the transaction in the light of the figures which I have given you above, and let me know whether you still would like to have us sell the common and buy the 120 shares of preferred.” Mrs. Pank did not reply but turned the letter over to Attorney Ashcraft who wrote defendant a letter Sep^tember 29, 1937, acknowledging the letter of Septem-r ber 22, saying he was somewhat embarrassed because he should have been representing both trustees but had been disregarded by defendant, contrary to the provisions of the will. The letter then mentions the stock and conversion and says that based upon the market price, as mentioned in defendant’s letter, which they had not verified, the trustees would probably have been justified in making the conversion because of the profit to be derived by the trust estate, but that “In our judgment the conversion should have been' made solely for the purpose of realizing upon the common stock as soon as it hád been acquired as a result of the conversion.” And that under the circumstances the trustees might be held to account for failure to dispose of the common stock, and held liable for the amount that might have been.realized if. they, had sol'd the common stock promptly after the conversion.

Mrs. Panic testified she was 71 years of age; that a few years before she was married she worked in the mail office of Montgomery Ward & Company from 1887 to 1890, when she was married. That March 1, 1937, she was on a West Indies cruise having left Chicago February 16; that she returned to Chicago March 10; that between January 1, 1937 and the time she left on the trip, no one from the Trust Company advised her as to the sale [exchange] of the 6 per cent preferred stock; that she could not remember having talked with defendant’s representative in regard to the advisability of selling the preferred stock; that during the same period “they never recommended to me the sale of Fairbanks, Morse & Company common stock. They did not at any time ever recommend to me the conversion of the 6% preferred stock into common stock.” That at the time she received and deposited the checks and signed the vouchers which she had received from the Trust Company, above referred to, she did not notice the fact that the number of shares of stock had been changed; that she did not read the voucher before signing; that she first learned of the conversion September 9, after her daughter, Phyllis, had gone down and talked with Mr. Carroll, of the Trust Company. That afterwards she had a conversation with Carroll and told him she did not want any more of the common stock and that he told her he would try to get back the preferred stock. That after September 22, she had one or two telephone conversations with Mr. Carroll with respect to the sale of the common stock; that she said: “You may do as you like about selling the common stock. I do not feel that it belongs to me. You acquired it.” After her attention was called to some memorandum she testified this conversation occurred in April, 1938.

On cross examination she testified that for some time she had owned 25 shares of the 6 per cent convertible preferred stock which she turned over to a friend who was in the bond business, before she left on the Caribbean trip and asked him to sell it at a certain price; that after she returned from the trip, about March 10, she found the friend had converted the 25 shares into 75 shares of the common stock. This was before March 1,1937, and that when she learned of this she made no objection because she didn’t want to break a friendship; that the reason she did not sell the 75 shares of common stock was that she thought it was a good thing; that June 3, 1937, she received a dividend on the 75 shares of common stock the same time she received a check from the Trust Company and the check read “on 75 shares of common stock so much per share.” She further testified that her daughter, Phyllis, one of the plaintiffs, lived with her and kept books of the dividends received, etc. That she did not remember e\ er having asked Mr. Carroll to sell any of the Fairbanks, Morse stock; that she had sold the 75 shares since the instant suit was commenced; that she thought the common stock which she received in 1935 became a part of the principal account and not a part of the income; that “I hold a mortgage that hasn’t paid for 12 or 13 years and is of no account. I can’t get anything on it at all.”

There is other evidence in the record to the effect that in December 1937, Mr. Carroll and Judge Hob an, of the Trust Company, called on Mr. Ashcraft and discussed the matter. Mr. Ashcraft testified, among other things, that at that time Carroll stated he had overlooked selling the common stock after the exchange of March 1, 1937, while Mr. Carroll and Judge Hoban gave a different version of this and say nothing was said on that point.

Plaintiffs contend.the judgment is wrong and should be reversed because the conversion by the Trust Company of the preferred into the common stock was a breach of trust in that it resulted in the acquisition of an improper trust investment and (2) that the conversion was done without the assent or knowledge of the codrustee, Mrs. Pank, and that there was no such an emergency occasioned by the absence of Mrs. Pank from Chicago as would warrant the Trust Company in making the conversion alone. Defendant’s position is that by a course of dealing by the trustees over a period of 11 years, defendant had the right to make the conversion in the absence of Mrs. Pank and without her express consent and that it was their duty to do so so as to prevent a loss to the trust estate. A number of authorities are cited, discussed and applied by counsel for both parties.

The principle is well established that£ ‘ The care and prudence to be exercised by trustees is that which ordinary men would exercise under like circumstances in connection with their own affairs. If a trustee £has exercised the care and judgment of ordinarily prudent men in their own affairs he will not be chargeable for mere errors of judgment nor for accidental injuries and losses.’ (3 Pomeroy’s Bq. Jur. — 3d Ed.— §1070.)” Wylie v. Bushnell, 277 Ill. 484; see also Cowles v. Morris & Co., 330 Ill. 11. But we think this rule should be made stronger, as stated by Judge Kenyon in Thompson v. Hayes, 11 F. (2d) 244, when after quoting the above rule from 3 Pomeroy’s Eq. Jur. 3d Bd. § 1070 he said: “The rule should be even stronger than expressed above, as a person dealing with his own property may exercise prudence or not as he may choose. A trustee, however, must exercise the highest good faith, keeping ever in mind the interests of the beneficiary, but he is not an insurer of results, and is not responsible for mere error of judgment or mistake.” Citing authorities, among them being the Wylie case [277 Ill. 484].

The question therefore for decision is, was the conduct of defendant Trust Company, in exchanging the preferred for the common stock within the rule above quoted? We think it was, having in mind all of the facts disclosed by the record. Here was stock in a company with which the testator had been employed for a number of years; he was an official of the company and owned some of its stock which he left in trust for the benefit of his family. We think the évidence shows Mrs. Bank thought well of the stock, much more so than she did of real estate mortgages, and the court will take judicial notice that real estate mortgages at and prior to the time in question were not the best investment. Straus v. Chicago Title & Trust Co., 273 Ill. App. 63. It seems to be conceded that defendant Trust Company acted wisely in making the exchange of 3 shares for 1. But the complaint is that it did not immediately after the exchange, sell the common stock. We think the evidence also discloses the fact that the exchange was in accordance with the custom followed for about eleven years and with the views of Mrs. Bank for she wanted to keep the Fairbanks, Morse stock and moreover had her 25 shares of preferred converted and received 75 shares of common stock. Of course the Trust Company should have taken the matter up.with her before she left on her Caribbean trip but this they neglected to do, and we think it obvious the failure of the Trust Company in this respect made no difference in the instant case.

From what we have above stated, we think it clear that Mrs. Bank’s children who are also plaintiffs would have no complaint had their mother consented to the exchange. They cannot now be heard to complain because of the neglect of the Trust Company to obtain her consent because we are of opinion that in making the exchange the Trust Company carried out the wishes of Mrs. Bank. The chancellor saw and heard the witnesses ; he found in favor of defendant, and upon a consideration of all the evidence in the record, we are clear we would not be warranted in disturbing the decree on the ground that the finding is against the manifest weight of the evidence.

The decree of the Circuit court of Cook county is affirmed.

Decree affirmed.

McSurely, B. J., and Matchett, J., concur.


author: Mr. Presiding Justice Soanlan

text:
    John Jung, Appellee, v. Norman Siegal et al., Defendants, London Guarantee & Accident Co., Ltd., Appellant.
    Gen. No. 42,007.
    Heard in the second division of this court for the first district at the October term, 1941.
    Opinion filed March 24, 1942.
    John E. Wilson, of Chicago, for appellant.
    Peden, Melaniphy, Ryan & Andreas, of Chicago, for appellee; John C. Melaniphy and Gerald Ryan, both of Chicago, of counsel.
   Mr. Presiding Justice Soanlan

delivered the opinion of the court.

A garnishment action based upon a tort judgment entered against Norman Siegal, defendant, in favor of John Jung, plaintiff, for $186.66 and costs. The garnishment action was tried by the court without a jury and the issues were found against the garnishee, London Guarantee & Accident Co., Limited, a corporation, and damages were assessed at $197.75. The garnishee defendant appeals from a judgment entered upon the finding.

The statement of claim alleges the facts in relation to the tort judgment; alleges that an execution was returned, “No property found,” and asks that summons issue against defendant garnishee and that the latter be required to answer in writing, under oath, certain interrogatories attached to the statement of claim. It is only necessary to refer to the fifth, as that interrogatory and defendant garnishee’s answer to the same present the issue in the case. Interrogatory 5 reads as follows:

“Interrogatory 5. Has said corporation garnishee defendant now in its possession any property, goods, chattels, rights, credits or effects of any kind belonging to said defendant Norman Siegal or in which said defendant is interested, and if so, describe the same fully and particularly, giving amounts, items and values thereof. Especially, did you, the corporation garishee defendant, issue to defendant Norman Siegal, on 1-12-40, your National Standard Automobile Liability Policy, No. K. D. 201934, covering 1939 Mercury coupe sedan, auto-motor No. 99A67289, which auto was involved in the collision on Jan. 28,1940 with plaintiff’s auto, out of which the judgment arose, and in which Policy you insured N. S. against property damage liability to extent of $5,000.00.”

Defendant garnishee first answered the interrogatory as follows: “Issued, but never effective.” Upon motion of plaintiff the said answer was stricken upon the ground of insufficiency. The garnishee defendant then filed the following answer:

“Answer: Policy was issued, but never effective, due to the fact that it was cancelled as of the date of issue, because of false warranties made to obtain the Policy, which would not have been issued if the false warranties had not been made; and for failure to pay the premium required under the terms and conditions of the Policy.”

Defendant garnishee contends: “I. Plaintiff in a garnishment proceeding has no greater rights against the garnishee defendant than are possessed by the original defendant. Plaintiff . . . can recover only such benefits as the insured might recover in an action upon a contract or policy of public liability insurance. II. The court erred in finding that the policy was in Torce and effect, and in failing to find that the policy was void ab initio. A. Where a policy is issued as result of false statements, the policy is void ab initio, and the defendant and his judgment creditor are bound by the terms and conditions of the policy. B. Where the policy is issued in consideration of the premium and the statement in the policy, the policy does not become effective until the premiums are paid.”

On January 12, 1940, defendant garnishee issued its automobile policy to Norman Siegal, defendant in the original action, for public liability and property damage, for one year. On January 28, 1940, defendant’s car, covered by the policy, was involved in a collision with a car belonging to John Jung, plaintiff, and as a result of the collision the latter recovered a judgment against defendant, on April 7, 1941, for $186.66. An execution was returned on April 28, 1941, “No property found. ’ ’ On March 14, 1940, forty-six days after the accident, garnishee defendant mailed to defendant Siegal the following letter:

“March 14, 1940
“Registered Mail
“Mr. Norman Siegal,
“Moto Scoot Manufacturing Co.
“7723 Essex Avenue
“Chicago, Illinois
“Dear Mr. Siegal:
“Relative to London Guarantee & Accident Co. policy KD-201934 issued for you effective as of January 12th, 1940 to expire January 12 th, 1941, we find that there is a breach of warranty in the statements thereof and we therefore consider that the policy has been of no effect and has been null and void from its effective date.
“We also observe that the premium thereon has not been paid.
“Very truly yours,
“London Guarantee & Accident Co. Ltd.
“Conkling, Price and Webb,
“General Agents.
“By
“INZ :hb”

Garnishee defendant designates this letter “as a written notice of the cancellation of the policy.” It will be noted that the letter does not specify what statements constituted “a breach of warranty,” nor does defendant garnishee’s answer to Interrogatory 5 state what “false warranties” were made to obtain the policy. It was during the trial that the defendant garnishee first disclosed the ground upon which it based a right to cancel the policy . Strictly speaking, defendant Siegal made no representations nor warranties. A representation is a statement proffered by insured as a basis for the contract. A warranty consists of a statement by insured upon the literal truth of which the validity of the contract depends. A misrepresentation is a false representation of a material fact by one of the parties to the other tending directly to induce the other to enter into the contract. Siegal made no written representations nor warranties. Indeed, the record does not show that he made any oral representations or warranties. Defendant garnishee contends that defendant Siegal warranted that he had no automobile policy cancelled within one year; that this warranty was proven false upon the trial and voids the policy ab initio. Defendant garnishee introduced evidence tending to show that another insurance company wrote, for defendant Siegal, a policy on the same automobile that is covered by the instant policy; that the said policy was issued for a period of one year from August 9,1939, and was cancelled on December 21, 1939, for nonpayment of premium. Defendant Siegal testified that so far as he knew he never had any policy on the said automobile cancelled. Attached to the instant policy is a statement made by the general agents of defendant garnishee to the latter. This statement contains “Declarations,” Item 7 of which reads as follows: “Item 7. No insurer has canceled any automobile insurance issued to the named insured, nor declined to issue such insurance, during the past year, except as herein stated: No Exceptions.” The insurance policy contains many “Agreements,” “Exclusions” and “Conditions.” One of the “Conditions” reads as follows: “9. Declarations. By acceptance of this policy the named insured agrees that the statements in the declarations are his agreements and representations, that this policy is issued in reliance upon the truth of such representations, and that this policy embodies all agreements existing between himself and the company or any of its agents relating to this insurance.” Defendant garnishee contends that by reason of this “Condition” defendant Siegal was bound by the “declarations” made by the general agent to its company the same as if he had made the “declarations” himself. In support of this contention defendant garnishee cites such cases as McMahon v. Continental Assur. Co., 308 Ill. App. 27, 34; Hancock v. National Council Knights & Ladies of Security, 303 Ill. 66, 71. In each of these cases the representations were made by the insured. No case is cited that applies to the instant situation. Defendant Siegal had no possible chance to ascertain what “declarations” had been made by the general agent to its company until the policy was delivered to him, but defendant garnishee contends that it was his duty to examine all of the “Agreements,” “Exclusions” and “Conditions” in the policy and that such an examination would have apprised him that by accepting the policy he agreed that the “declarations” made by the general agent were his agreements and representations. It will be noted that “Condition” 9 does not inform the insured that “the statements in the declarations” refer to “declarations” made by the general agent to its company. A lawyer, but not a layman, would suspect that “Condition” 9 referred to the so-called “declarations” made by the general agent. But even if it be assumed that defendant Siegal was bound by the “declarations” made by the general agent to its company, before defendant garnishee could declare the policy void because of an alleged “breach of warranty in the statements thereof,” it should clearly appear that the defendant, in adopting the “declarations” made in Item 7, was guilty of a material misrepresentation. If defendant garnishee intended to fairly apprise defendant Siegal of the importance of the answer made by the general agent to Item 7, plain language should have been used in making the answer. The language used was not the language that a layman would use. It would be an inequitable rule that would allow defendant garnishee to void the instant policy upon an alleged misrepresentation so worded. In this connection it must be borne in mind that the letter of March 14,1940, was written forty-six days after the accident in question, that formed the basis of the judgment in the original case. The premium on the policy had not been paid, although defendant Siegal had been in possession of the policy since January 12, 1940, and it is difficult to escape the conclusion that defendant garnishee was seeking a way to escape payment under the policy. When defendant garnishee wrote the letter of March 14, 1940, and when it made the answer to Interrogatory 5, it had not yet determined upon its exact defense, and it did not disclose that defense until the trial of the cause.

Defendant garnishee contends that the policy did not become effective until the premium was paid and that the evidence shows that the premium was not paid. Plaintiff contends that under the evidence the trial court was justified in finding that the garnishee defendant extended credit to defendant Siegal as to the payment of the premium and therefore the policy became effective when it was delivered to Siegal. We agree with this contention. The letter of March 14, 1940, does not state that the policy was null and void from its effective date because the premium had not been paid. The letter concludes with' the following-observation: “We also observe that the premium thereon has not been paid,” which language is entirely consistent with plaintiff’s theory of fact that defendant garnishee extended credit to Siegal. The evidence shows that Siegal had possession of the policy from January 12, and defendant garnishee did not attempt to void it until forty-six days after plaintiff’s cause of action arose.

We have given careful consideration to the facts and circumstances in this case and have reached the conclusion that the judgment of the municipal court of Chicago should be affirmed, and it is accordingly so ordered.

Judgment affirmed.

Sxjllivax and Friexd, JJ., concur.


author: Mr. Justice Friend

text:
    People of the State of Illinois for use of Salvatore DeCola et al., Appellees, v. Maryland Casualty Company, Appellant.
    Gen. No. 41,645.
    Heard in the second division of this court for the first district at the April term, 1941.
    Opinion filed March 24, 1942.
    Louis B. Simon and Leon Leoour Drolet, both of Chicago, for appellant.
    William C. Greatman, of Chicago, for appellees.
   Mr. Justice Friend

delivered the opinion of the court.

The beneficial plaintiffs, Salvatore DeCola, Bose DeCola and Marie Paul, children and heirs at law of Fred S. DeCola, deceased, brought suit against defendant as surety on the bond of Carl Laurie, administrator de bonis non of their father’s estate, for damages alleged to have been sustained through Laurie’s derelictions in administering decedent’s estate. Trial by jury resulted in a verdict and judgment in favor of plaintiffs for $4,000 and costs, from which defendant appeals.

From the pleadings and evidence adduced upon trial it appears that August 12, 1926 Fred S. DeCola died intestate, leaving him surviving his widow and the three plaintiff children as his sole heirs at law. Dominic H. Yalens was appointed administrator February 10, 1927. He at once qualified by furnishing bond for $20,000 with United States Fidelity & Guaranty Company as surety. Deceased had been engaged in business as a funeral director on West Grand Avenue, Chicago. After his death numerous claims were lodged against his- estate. In September 1928 no inventory having been filed by the administrator, a citation and attachment was issued against him. Thereafter in January 1929 he filed an inventory and appraisement and was ruled to present his final account before April 5, 1929. Having failed to comply with this rule, numerous citations and attachments were thereafter issued and his letters of administration were finally revoked October 9, 1930 and he was ordered to file his final account. November 10, 1930 Laurie was appointed as administrator de bonis non, and his bond of $7,000 signed by defendant, Maryland Casualty Company, as surety, was approved. William B. Henry was retained as his attorney to represent him in the administration of the estate.

During his regime "as administrator Yalens had not collected the accounts which constituted the principal assets of the estate nor made any appreciable effort to do so. Many of these accounts had become barred by the statute of limitations and others were desperate or of extremely doubtful value. Without the formality of a court order Yalens had sold the furniture and fixtures of the funeral business and was charged generally with dereliction of his duties. When he ultimately filed his final account pursuant to the order of the. probate court, plaintiffs interposed objections thereto, some of which were sustained, others overruled, and Yalens was ordered to pay into the estate $1,246 for and on account of his liability. He perfected an appeal from this order to the circuit court, where pursuant to hearing in 1937 he was ordered to pay the estate $1,005, or upon his failure so to do, United States Fidelity & Guaranty Company, the surety on his bond, was ordered to pay that sum to Laurie, the administrator de bonis non of the estate. The surety paid the judgment July 28, 1937, and it was satisfied on the record of the circuit court by the administrator de bonis non.

Thereafter plaintiffs brought suit in the Superior court against the United States Fidelity & Guaranty Company for claimed derelictions of the administrator Valens. The allegations of the complaint were substantially the same as the subject matter of the objections which plaintiffs had filed to Valens’ final account. The surety company moved to strike the complaint and dismiss the suit on the twofold ground (1) that the matters involved had been adjudicated by the probate and circuit courts, and also (2) because it had been released from all liability. The motion to strike was sustained by the superior court and the suit was accordingly dismissed. On appeal to the Appellate Court (People ex rel. DeCola v. United States Fidelity $ Guaranty Co., 306 Ill. App. 518, wherein the opinion was filed October 1, 1940), the order or judgment of the superior court was affirmed and both defenses interposed in the motion to strike the complaint were specifically approved. Plaintiff’s counsel there contended that before the doctrine of res judicata can be interposed as a bar there must be identity of parties in the two actions, and the issues and the relief sought must be identical. But the court applied the doctrine in a broader sense and held that it is also binding upon the privies, upon the original parties and other persons who are estopped because they were represented in the first action; that the doctrine applies not only to the issues actually involved and determined in the first suit, hut extends to every other matter which might have been raised and determined; and the court pointed out another equally well-established rule of law, namely, that a prior judgment is a bar to a subsequent suit, even if the issues and the relief sought were not identical, where a material fact in litigation has been determined. (See opinion and cases cited therein.) By way of conclusion the court said in that case that plaintiffs were seeking to recover for the same derelictions of Valens as were involved when they filed their objections to his final report in the probate court, and the property they sought to have the administrator account for included the same property they sought to recover in the subsequent suit; that all these questions had been properly raised and determined by the probate and circuit courts, and in these circumstances the judgment of the circuit court was res judicata of all matters involved in the suit against the surety company.

William B. Henry, who had been retained by the widow to procure the removal of the original administrator, testified that Valens could not be found for a long time after Laurie’s appointment, although diligent efforts were made to discover his whereabouts, and accordingly Henry filed a petition in the probate court setting forth the efforts he had made to find Valens, seeking an order for his removal. Such an order was entered, and November 10, 1930 Laurie was appointed administrator de bonis non. Henry was then retained to represent the new administrator. He obtained from the widow a number of loose-leaf ledger sheets which appeared to be the accounts receivable of deceased, and sent letters to all persons who seemed to be indebted to deceased. Later he wrote follow-up letters to the debtors and Laurie personally called on many of them. Finally Henry delegated a young lawyer from his office to contact the debtors, all without avail. The persons interviewed either claimed that they had paid their bills to Valens, or that they did not owe the money, or, as Henry testified, they slammed the door when the collector called. After his appointment as attorney Henry visited the former undertaking parlor with the widow. It had been closed as a business, but he examined the equipment, which consisted of two or three wicker upholstered settees, several chairs, a tabid and lamp in the reception room and some embalming instruments and folding chairs in the' rear. A neighboring real estate man showed him a bill of sale of these chattels executed by Valens, which had been sold for something like $50. Henry said that he had contemplated filing suits for the recovery of money due but had difficulty in finding witnesses who would be able satisfactorily to prove the claims, and he testified that he had consulted Judge Henry Horner about starting suit against Valens on his bond, but no funds being then available, Judge Horner withheld his approval of the plan. The only other assets in the estate were some cemetery lots, which Henry testified were “practically unsalable.” He advertised these lots for sale and was waiting for an opportunity to dispose of them when Miss Phyllis Kelley, assistant to Judge Horner, insisted that the estate be closed as insolvent. Accordingly he prepared a petition which was served on all the heirs, creditors and others interested, advising them that the estate was about to be closed. Gustave E. Eiedl, who represented plaintiffs, then advised Henry that he intended to sue the United States Fidelity & Guaranty Company on Valens’ bond, and following this telephone conversation Eiedl visited Henry’s office, where the latter gave him such information as he had acquired about the assets of the estate and the efforts that had been made by him to realize on them. Subsequently the cemetery lots were sold and Henry received from the United States Fidelity & Guaranty Company a check for $1,005, which was paid pursuant to the order of the circuit court, with which Laurie, on advice of his attorney, paid the costs of administration, attorney’s fees to Riedl, premium on bonds, bills for advertising the cemetery lots and for transferring them to the purchaser, and an item of $100 fees to Henry as attorney for Laurie. The balance was paid to the widow on account of her award. Laurie’s petition for closing the estate having been filed, he procured through Mr. Riedl a waiver of notice and consent from the widow and the three plaintiffs wherein they entered their appearance, waived notice of the closing of the estate, and consented “to any and all orders of said Court, approving the final report and account filed herein and for the discharge of Carl Laurie, Administrator de bonis non, of the Estate of the said Fred S. DeCola, deceased.” In pursuance of this petition an order was entered in the probate court February 3, 1938 declaring the estate to be insolvent, ordering Laurie to turn over and deliver to the widow all the residue and remainder of the personal property and assets remaining in the estate, that Laurie be discharged from further duties, obligations and liabilities as administrator de bonis non after paying the costs and expenses incurred, as set forth in the petition (except that $60 for administrator’s fees was disallowed), and ordering him to file the vouchers covering expenses and receipts from the widow and others showing payments made. No objections having been filed to the petition nor to the order entered pursuant thereto either by plaintiffs or any other person, the probate court February 1, 1939 entered an order firifling that Laurie’s vouchers had been filed, and he was accordingly discharged. The suit at bar for damages on account of the alleged derelictions of the administrator de bonis non was filed by plaintiffs July 28, 1939.

The charges against the administrator de bonis non as shown by the complaint may be summarized as follows: That it was Laurie’s duty to ascertain the whereabouts of Yalens and to enforce collection from him for and on behalf of decedent’s estate of any and all assets belonging thereto which came or may have come into Yalens’ hands during the time that he acted as administrator, and to collect and corral all the assets belonging to the estate in the hands of other persons, but that Laurie “in total disregard of his duties in this behalf, wholly failed and neglected and refused to perform his duties”; that during all the time that Laurie was acting as administrator de bonis non he utterly failed to locate Yalens and either obtain from him any of the assets belonging to the estate which came into Yalens’ hands while he was acting as administrator, or to compel Yalens to account to him; that he failed to file annual reports, as required, over a period of several years, or to present an inventory or a final report and account; that there were certain accounts receivable arising out of deceased’s business which were in excess of $10,000 which Laurie, contrary to his duty, “wholly neglected, failed and refused to collect” either from Yalens or during the time that he acted as administrator de bonis non; that Laurie failed to take the necessary steps to recover the furniture and fixtures contained in the undertaking establishment from the vendees to whom it had been sold by Yalens for an inadequate price without leave or authority of the probate court.

Defendant contends that the subject matter of all of the complaints lodged against it were adjudicated by the probate court at the time that Yalens filed his final report and account, when the court passed upon objections interposed by the same parties who are plaintiffs in this proceeding. The record supports this contention. After Yalens had finally submitted his final report and account, plaintiffs filed objections thereto, following which a hearing was had in the probate court and an order entered which found that Valens “was guilty of negligence and long delay in collecting and corralling certain of the assets of the . . . Estate . . . listed in the inventory heretofore filed . . . herein, . . . and that by the use of proper diligence and care the said Dominic H. Valens, Administrator herein, could have collected certain of the assets of the said Estate . . . and that by virtue of, and by reason of, the negligence and mismanagement of the said Dominic H. Valens, Administrator herein, the said Dominic H. Valens, neglected and failed to collect or corral certain of the assets of the said Estate of Fred 8. DeCola, deceased, especially certain accounts receivable listed as assets . . in the inventory heretofore filed ... by the-said . . . Administrator herein,” and the probate court ordered and directed Valens to pay Laurie, as administrator de bonis non, the sum of $1,246 on account of the liability which Valens had incurred to the estate. This sum was subsequently modified on appeal to the circuit court to $1,005, which the surety on Valens’ bond paid to Laurie, thus satisfying the judgment of record in the circuit court. With respect to the furnishings of the undertaking establishment, the record shows that although objections had been filed by plaintiffs to the inadequacy of the price and the fact that the sale was made by Valens without order of court, on hearing, plaintiffs, after conference with their counsel, decided to withdraw these objections.

It thus appears that the subject matter of these accounts, which is the principal issue in controversy, was definitely disposed of in the probate and circuit courts by the entry of an order adjudicating Valens to have been negligent and fixing upon him and his surety the liability for his failure to collect the accounts. Those who were plaintiffs in that proceeding and who filed their objections to the final account of Valens, which was heard and adjudicated in the probate court, were the same parties who waived notice of the closing of the estate by Laurie and consented to the closing óf the estate, and the orders entered on Laurie’s petition, which are hereinbefore set forth, again adjudicated any objections which plaintiffs might have had to the closing of the estate, by declaring the estate insolvent, discharging Laurie as administrator de bonis non, and approving his accounts.

Plaintiffs’ counsel argues 'tliat these orders and judgments of the probate and circuit courts are not res judicata because, as he says, Laurie’s petition to close the estate is not a final account but only a petition asking the court to declare the estate insolvent and for the discharge of the administrator. This contention is untenable. It is apparent that the controversy is' founded upon the failure of Laurie to require Yalens, his predecessor, either by suit or otherwise, to pay the accounts which could have been collected by Yalens before the statute of limitations became effective, and the charges of the complaint are principally to the effect that Laurie failed in his duty in this behalf, and neglected and refused to discharge the obligations imposed upon him by his appointment. We are satisfied from an' examination of the record that these charges are untenable, but aside from that circumstance it is equally clear that it would have been unavailing for Laurie to sue on these accounts after the probate court had heard and determined their status and declared them uncollectible, by reason of the negligence and dereliction of Yalens. In view of this adjudication by the probate and circuit courts, we think the doctrine of res judicata is applicable, and that plaintiffs are estopped from maintaining their cause of action against the defendant as surety on Laurie’s bond. Citations supporting this conclusion are contained in the former opinion People ex rel. DeCola v. United States Fidelity & Guaranty Co., 306 Ill. App. 518. One of the cases cited therein, Little v. Blue Goose Motor Coach Co., 346 Ill. 266, holds it to be the established rule of law that a prior judgment is a bar to a subsequent suit, even if the issues and the relief sought were not identical, where a material fact in litigation has been determined. The material fact in litigation in this proceeding is the finding that these accounts could not be collected because of the negligence and derelictions of Valens; and the adjudication of that material fact through the various orders heretofore entered in this estate, and litigated in several courts, constitutes a bar to recovery in this proceeding.

It would serve no useful purpose to remand the cause for a new trial because it is obvious that plaintiffs are precluded from recovery. Therefore, the judgment of the superior court is reversed and judgment for costs will be entered here in favor of defendant.

Judgment reversed ai%d judgment here in favor of defendant.

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


text:
    Heitman Trust Company, Trustee, v. Edward W. Parlee, Jr., et al. Ruth Riff, Appellant, v. Union Park Hotel Company, Appellee.
    Gen. No. 41,727.

      Heard in the second division of this court for the first district at the June term, 1941.
    Opinion filed March 24, 1942.
    Rehearing denied April 11, 1942.
    Hershenson & Hershensou and James B. McKeon, all of Chicago, for appellant.
    Maurice Burr, of Chicago, for appellee; Clyde C. Fisher, of Chicago, of counsel.
   Mr. Justice Friend

delivered the opinion of the court.

Ruth Riff, the purchaser of hotel property at a master’s sale held pursuant to a foreclosure decree which directed the furniture to be sold along with the real estate, appeals from an order of the superior court denying her petition to restrain the Union Park Hotel Company, a corporation, assignee of the original mortgagor who operated the hotel for three years after it was constructed and opened for business, from removing the furniture from the foreclosed premises, and for a writ of assistance as against said property.

The essential facts disclose that on February 14, 1929 Edward W. Parlee, Jr., executed a trust deed to secure a bond issue of $285,000, to be used for the purpose of constructing an apartment hotel. The trust deed conveyed real estate upon which the hotel was to be erected, “together with ... all window screens, window shades, door screens, curtain fixtures, furnaces, ranges, gas and electric light fixtures, . . . in-a-door or roll-away beds'; furniture, carpets, linens, drapes, curtains, tables, chairs, silverware, knives and forks, spoons, glass, glassware, stoves, and all household furniture, fixtures, equipment, utensils, accessories and everything used in and about the hotel or kitchenette apartment building . . . .” Another provision of the trust deed stipulated that ‘ ‘ The party of the first part [the mortgagor] and for his heirs, administrators, executors or assigns, does hereby agree immediately upon the erection of the building, to completely furnish the building erected or to be erected upon the premises hereinabove described, and to keep the same so completely furnished until this Trust Deed shall be duly released, so that said building during all such time may be operated furnished, or as a furnished Hotel or apartment hotel.”

An apartment hotel was erected on the mortgaged premises and opened for business on June 20, 1929 by Union Park Hotel Building Corporation which had been organized for operating purposes. Arthur A. Klein acted as agent for the corporation in furnishing the hotel, operated the enterprise from its inception until foreclosure and was the owner of more than 50 per cent of the corporate stock. After the building was constructed he requested and received from Heitman Trust Company, the trustee, a statement of account showing disbursement of the proceeds of the sale of $235,000 unsubordinated bonds, which was still in his possession when this proceeding was heard.

June 23, 1932-, while Klein was still operating the enterprise for Union Park Hotel Building Corporation as its agent and manager, and part owner, a new corporation was formed bearing the similar name of Union Park Hotel Company. At the same time the original corporation changed its name to 1519 Warren Boulevard Building Corporation. Several days later Union' Park Hotel Company entered into a contract with the original building corporation for the purchase of the furniture and furnishings contained in the building, and the old building corporation leased the premises to the new company. At the time of this transaction some $18,000 of the matured bonds had been paid and canceled, while others were in imminent default.

On January 7, 1936 Heitman Trust Company, trustee, filed a complaint to foreclose the trust deed because of default in the payment of principal, interest and taxes. Union Park Hotel Building Corporation, being the owner of the equity of redemption, was made a party defendant to the foreclosure proceedings, and an appearance was filed on its behalf, as well as for 1519 Warren Boulevard Building Corporation. A subsequent answer filed by both corporations neither admitted nor denied any of the allegations of the complaint but demanded strict proof thereof. Union Park Hotel Company and Klein were also made parties defendant to the foreclosure proceeding, were personally served, and defaulted for failure to appear. The cause was thereafter referred generally to a master, who recommended the entry of a decree of foreclosure and sale of the property in accordance with his findings, and specifically designated the furniture and chattels described in the trust deed to be sold along with the real estate and building as security for the indebtedness. No objections were filed by any of the parties with respect to the property found by the master to have been conveyed as security for the indebtedness.

June 30, 1937 a decree of foreclosure and sale was entered in accordance with the master’s report and recommendations, which directed the master to sell the real estate, “together with ... all window screens, window shades, door screens, curtain fixtures, furnaces, ranges, gas and electric light fixtures, . . . in-a-door or rollaway beds; furniture, carpets, linens, drapes, curtains, tables, chairs, silverware, knives and forks, spoons, glass, glassware, stoves, and all household furniture, fixtures, equipments, utensils, accessories and everything used in and about the hotel or kitchenette apartment building . . . .”

The master filed his report of sale November 2, 1939, stating that he had conducted the sale pursuant to the decree of foreclosure, that Ruth Riff offered and paid for the whole of said property the sum of $172,500, and that being the highest and best bid offered, he had accordingly struck off and sold to her for that sum the real estate, together with all buildings, improvements and appurtenances thereunto attached, including the furniture, fixtures and chattels which he specifically described in the identical language of the decree, as hereinbefore set forth. On the same day a decree was entered approving in all respects the sale and report of the master. Thereafter certificate of sale was issued to Ruth Riff conveying the real estate and all property hereinbefore described. She filed her petition setting forth the salient facts pertaining to the foreclosure proceeding, alleging that Union Park Hotel Company and Klein had threatened to remove the furniture and chattels from the hotel premises; had likewise threatened that when the hotel property was turned over to her it would be vacant and without any of the furniture contained therein; and that unless the hotel company and Klein were restrained from removing any of the chattels from the premises, she would suffer irreparable loss and damage. After obtaining the master’s deed on December 9, 1940, she filed a second petition seeking a writ of assistance against the Union Park Hotel Company. The respondent’s answer to the first petition denied the allegations of the petition and averred that the furniture used in the hotel was not subject to the lien of the trust deed foreclosed. The chancellor denied her application for an injunction and dismissed the petition, and at the same time issued a writ of assistance only as to the real estate but denied her a writ of assistance as to the balance of the property described in the petition.

In support of the chancellor’s order it is urged by respondent, Union Park Hotel Company, that the court did not have jurisdiction of the personal property described in the trust deed because the real estate mortgage was not executed, acknowledged and recorded in compliance with the statute pertaining to chattel mortgages and therefore cannot be held to include chattels described therein; and that petitioner, being chargeable with notice that the court had no jurisdiction to enter the decree, cannot assert the rights usually accorded to a purchaser for value at a judicial sale. (Ill. Rev. Stat. 1941, ch. 95, pars. 1, 2 and 4 [Jones Ill. Stats. Ann. 83.01, 83.03 and 83.04].) Paragraph 1 of the statute provides in substance that no mortgage of personal property shall be valid as against the rights and interests of any third person unless possession thereof shall be delivered to and remain with the grantee or the instrument shall provide for the possession of the property to remain with the grantor and be acknowledged and recorded or filed in accordance with the provisions of the act. Paragraph 2 provides for acknowledgment of the chattel mortgage, indicating the form of. acknowledgment to be used. Paragraph 4 provides that no mortgage of personal property shall be valid as against the creditors of the mortgagor unless filed or recorded in the office of the recorder of deeds within ten days of its execution, and that any such mortgage not deposited for filing or recording within the specified time shall be fraudulent and void as to creditors.

The defense to the petition for an injunction and writ of assistance is based primarily on the theory that respondent is a “third person” within the contemplation of the statute, and that the trust deed foreclosed which pledged the furniture and chattels within the hotel along with the real estate and building constructed on the property, not having been filed or recorded as provided by statute, was invalid as to respondent and therefore divested the court of jurisdiction to sell the chattels at the foreclosure sale. In a contest between a mortgagee and a third person or creditor who seeks to reach the mortgaged chattels, where it is made to appear on trial that a mortgage is bona fide, it devolves on the person claiming title to the chattels to establish his superior equity by showing that he belongs to the class of creditors or persons who are entitled to challenge the validity of the mortgage as against them, because not duly or seasonably recorded. 11 C. J. 514, citing St. Paul Title Insurance & Trust Co. v. Berlcey, 52 Minn. 497, 55 N. W. 60. It is evident from the record that respondent failed to sustain this burden. It cannot be denied that from the very beginning Klein was the guiding genius of the hotel. He managed and controlled the original building corporation and operated the hotel under the original plan as well as under the new corporation. No other individual appears in the picture. He opened the hotel upon its completion in 1929 and testified that he was present there substantially every day thereafter. He requested and received from the trustee a statement of account showing disbursements from the proceeds of the sale of bonds which was still in his possession at the time of the trial, indicating his personal interest in the enterprise. It must be assumed, when the new corporation was formed in 1932 and simultaneously therewith the original company relinquished its almost identical name to the new corporation and immediately thereafter entered into a contract for the sale of the furniture of the old company to respondent, that Klein was instrumental in effecting these changes because he was heavily interested as a stockholder and was in charge of the operation of the hotel property as manager for respondent. The record does not suggest that any other individual was at all interested in the proceeding. Under the circumstances Klein’s knowledge of the transaction is necessarily imputed to the new corporation. It has been held in numerous jurisdictions that the knowledge of an agent or an attorney regarding an unrecorded or defective chattel mortgage is the knowledge of his employer. 11 C. J. 523, sec. 200, and cases cited therein. It is fair to assume that in June 1932, when the corporate changes were effected and the furniture purchased by respondent, Klein knew that the original building corporation from which these chattels were obtained was about to default in the payment of certain of its bonds and that foreclosure of the property would probably follow; and that since all of the furniture in the hotel was subject to the lien of the trust deed, the entire property, including the chattels, would be sold to satisfy the mortgage debt. Petitioner’s counsel argue with considerable force that Klein thus sought to circumvent the bondholders and favor himself and respondent, in which he was heavily interested, by improvising the plan employed for acquiring the furniture and furnishings in the hotel. The knowledge of all that he did, being imputed to the respondent corporation for which he acted and in which he was interested, estops it from claiming that it was a third person in the transaction within the meaning of the statute. Fuller v. Paige, 26 Ill. 358.

In some States the requirement that chattel mortgages be recorded is made absolute by statute, but in Illinois the necessity for recordation is intended primarily as a safeguard to protect the interests of third persons or creditors so as to prevent fraud and deception by precluding a mortgagor of personal property from holding himself out to the world as an unqualified owner. Those who claim as third persons or creditors as against a mortgagee must exercise the utmost good faith, and a transfer which will be protected as against a chattel mortgage must be bona fide (Niepschield v. Reuss, 92 Ill. App. 636), and for a valuable consideration (11 C. J. 518, sec. 194, and cases cited therein). In the Niepschield case it was held that good faith and the absence of fraudulent intent must characterize all contracts, and where the facts show a contrivance and design by a party, knowing of the existence of a chattel mortgage, such party cannot receive the aid of the courts in furtherance of the design.

Respondent does not seriously question the rule of law that an unrecorded chattel mortgage is valid as between the parties; its defense to the petition was predicated upon the contention that it was a third person within the contemplation of the statute. It is not uncommon in modern business practice to pledge the furniture, fixtures and chattels within a hotel as part of the security for the mortgage indebtedness assumed by the mortgagor in making a loan for the construction of a hotel enterprise. In Haver v. North American Hotel Co., 111 Neb. 13,195 N. W. 483, a foreclosure proceeding was brought under a trust deed which pledged the furniture and fixtures along with the real estate in language strikingly similar to the instrument here under consideration. A slightly different question arose in that proceeding. It was there contended that the language, “together with any and all buildings, improvements and appurtenances now standing, or at any time hereafter constructed or placed upon said land, or any part thereof, including all . . . furniture and furnishings of every kind . . . ,” must be limited to such articles as come within the meaning and classification indicated by the words “buildings, improvements and appurtenances.” The court held otherwise, however, and said that a reading of the whole clause manifested the intention of the parties that the lien should not only attach to the building and appurtenances but to all of the designated articles that might be placed in the building, either then or thereafter erected on the premises. In Irving Trust Co. v. Spruce Apartments, Inc., 44 F. (2d) 218, it was held that a pledge of furniture in a real estate mortgage was enforceable as between the mortgagor and mortgagees, citing Klaus v. Majestic Apartment House Co., 250 Pa. 194, 95 Atl. 451. In Pennsylvania Chocolate Co. v. Hershey Bros., 316 Pa. 292, 175 Atl. 694, the court under similar circumstances said that if when the mortgage was given the parties contemplated it should cover an operating plant, if the machinery and appliances were necessary to the functioning of a complete plant, they are bound by the lien of the mortgage. In the case at bar the property in question was intended for a one-use purpose, namely, an apartment hotel, and without the furniture, fixtures and furnishings it could not be adapted for that purpose. Certainly as between the' original parties it was expressly stated and contemplated that the furniture should be subject to the lien of the mortgage, and validity should be given to this provision of the trust deed. What happened thereafter has already been discussed. It is fair to conclude that the plan employed by respondent, through its agent manager and part owner, was designed to deprive the bondholders of part of the security of the lien for which they had specifically contracted.

Moreover, the contention that the decree of foreclosure is “absolutely void and unenforceable and the Court was without jurisdiction to enter the same” is untenable for another reason. Respondent and Klein were both made parties to the foreclosure proceeding and had an opportunity, if they had so desired, to challenge the power of the court to order the sale of the chattels along with the real estate under foreclosure, and if the court had determined this issue adversely to them, they could have appealed from the decree. Instead, they both defaulted and took no part in the proceeding. The court undoubtedly had jurisdiction of the subject matter and of the parties. It is not contended that the foreclosure of the real estate was in any wise irregular or improper. The most that can be claimed by respondent is that the court erred in ordering the chattels to be sold; but that provision in the decree would not render it “absolutely void and unenforeeable.” We recently had occasion to pass upon a similar question in Sunbeam Heating Co., Inc. v. Chambers, 312 Ill. App. 382 (Abst.), wherein the assignee of the purchaser, at a sale held pursuant to the foreclosure of a mechanic’s lien, contended that one who buys at a master’s sale, in good faith, relying upon the decree, will be unaffected, notwithstanding the decree may afterwards be reversed. After an examination of the authorities we concluded that title of a bona fide purchaser is good, notwithstanding there may may have been errors or irregularities in the proceeding leading up to the decree which rendered it irregular, and in consequence of which it might have been set aside or reversed. In that ease the principal defendants claimed that they had not been served with summons and that the court was absolutely without jurisdiction to enter the decree. This question was resolved against them by the trial court on the pleadings and without a hearing. It is, of course, fundamental in our law that the court must have jurisdiction of the subject matter and of the parties before a valid judgment or decree can be entered against them, but a distinction must be drawn between cases where the jurisdiction of the subject matter or party does not exist, whereby the judgment is a nullity, and situations, as in the case at bar, where the court undoubtedly had jurisdiction of the subject matter and of the parties, but may have erroneously exceeded its jurisdiction. Under the latter circumstances, where no appeal is taken, a purchaser for value at a judicial sale would be protected against parties claiming that the decree was erroneously entered.

Along with the foregoing contention, respondent also argues that a purchaser at a judicial sale, in order to b¿ protected against the equitable right of a third person, must prove that he was a purchaser for value and has paid the purchase price. Counsel say that, under the terms of the sale as provided in the decree, the property was sold subject to the right of the purchaser to pay the amount of her bid or any part thereof by delivering to the master the unpaid bond or bonds secured by the trust deed and to receive credit therefor on the amount of her bid; and that since Ruth Riff did not testify in the proceeding and neither the master’s report of sale nor the decree confirming it indicates how the bid price was paid, we are to assume that Ruth Riff was merely a “dummy” or agent for the bondholders’ committee and therefore, being charged with notice of the proceeding, she cannot be accorded the rights of an innocent purchaser or the rights of a purchaser for value. We find in the record, however, a stipulation that Ruth Riff was not a party to the proceeding except as a purchaser at the master’s sale; nor was the bondholders ’ committee a party to the proceeding. The record shows that the petitioner offered and paid the sum of $172,500 and that being the best and highest bid offered, the master sold her not only the real estate but other property described in the trust deed, the bonds, the complaint, master’s report, decree, master’s report of sale and the master’s deed. Under the circumstances the presumption should rather be in favor of her contention that she is a purchaser for value.

For the reasons indicated, the order or decree of the superior court is, therefore, reversed and the cause remanded with directions to enter appropriate orders finding that petitioner acquired good title to the property purchased by her at the master’s sale, for a writ of assistance, and for the other relief to which she is entitled.

Order or decree reversed and remanded with directions.

Scahlah, P. J., and Sullivah, J., concur.


text:
    Frank S. Schratt, Appellee, v. Accurate Instrument Company, Inc., Appellant.
    Gen. No. 41,850.
    Heard in the second division of this court for the first district at the October term, 1941.
    Opinion filed March 24, 1942.
    Gustav E. Beerly, of Chicago, for appellant; John F. Difeenderefer, Jr., of Chicago, of counsel.
    Howard D. Moses, of Chicago, for appellee.
   Mr. Justice Friend

delivered the opinion of the court.

Frank S. Schratt, Sebastian Hansinger and Otto Schneider were the officers, directors and sole stockholders of defendant corporation. They devoted their full time to the company’s business and drew salaries of $150 each a week. At a meeting of the directors held in April 1938, their salaries were reduced from $150 to $90 a week and made retroactive as of January 1,1938. January 2,1939, the company owed each of them $699, based upon the reduced sum of $90 a week, for the year 1938, and on that day it executed and delivered to each of them a note for $699 signed by plaintiff as president and Otto Schneider as vice president. Plaintiff’s note being lost or destroyed, he sued on the missing instrument and had judgment for $699 and costs, from which defendant appeals.

As a foundation for the introduction of secondary evidence plaintiff’s counsel served defendant’s attorney with a notice to produce the corporate minutes at which the issuance of the notes had been authorized. This notice was served by mail in accordance with rule 5 of the municipal court, which provides that when a party is represented by an attorney of record, papers may be served on such attorney either by delivering the same to him personally, or leaving them in the office of the attorney with his clerk or a person in charge of the office, “Or, by depositing them in a United States post office or post office box, enclosed in an envelope, plainly addressed to such attorney at his business address, or to the party at his business address or residence, with postage fully prepaid.” Proof of service of mailing the notice to produce the corporate records was supported by the affidavit of counsel for plaintiff.

Upon trial plaintiff sought to prove his case by introducing secondary evidence of the corporate minutes of defendant, showing that the issuance of the note was authorized at a special meeting of the directors of the corporation. After several objections to this procedure had been sustained by the court, the proffered evidence was admitted by the trial judge, who held that under rule 5, paragraph (2) (c) of the municipal court, service of notice by mail was valid and sufficient. Thereupon Harry A. Knautz, who had rendered accounting services to defendant during the years 1938 and 1939, testified that he was present at the meeting of the directors in April 1938, which was attended by Sehratt, H'ausing and Schneider, and related a conversation of the directors substantially to the effect that in view of the reduced volume of business during 1938, the officers’ salaries would have to be reduced to curtail expenses, and that minutes were prepared at that time by the witness giving effect to these reductions in salary. Defendant’s counsel disclaimed receipt or knowledge of the notice mailed, but there was no- sworn testimony or offer of proof whatever to overcome the prima facie case made by the affidavit of plaintiff’s counsel of the mailing of notice. Moreover, defendant’s argument throughout its brief proceeds on the theory that the notice was served by mailing in compliance with rule 5.

Defendant takes the position that the service of notice to produce documents as a foundation for the introduction of secondary evidence is a substantive rule of law which may riot be changed or altered by the rules of the municipal court. It is conceded that the statute empowers the municipal court to make rules relating to the practice and procedure in that court for the efficient administration of justice, but defendant argues that the requisite notice to produce documents as a foundation for the introduction of secondary evidence is a substantive rule of law, requiring that such notice be served personally and that the municipal court is not empowered to change that rule.

There is considerable authority for the proposition that all rules of court must be subordinate to statutory enactments and substantive rules of law, and that although courts have undoubted power to make all reasonable rules for the transaction of the business of the courts, nevertheless their rules must be in furtherance of the law and not in contravention of it. The reported cases distinguish between rules of procedure made to facilitate the orderly disposition of the business of courts for the purpose of expediting the administration of justice, and rules of substantive law and statutory proceedings affecting the rights of litigants. The necessity for serving notice to produce documents as a prerequisite for the introduction of secondary evidence may be regarded as a rule of evidence, but the manner of serving such notice is undoubtedly subject to rule of court. It would be idle to argue that defendant’s liability on the promissory note sued upon would be in any way affected by the manner of serving notice to produce records as a foundation for the introduction of secondary evidence. While it may be conceded that under the practice usually followed, notice to produce documents is had by personal service, we see no reason why this procedure may not be modified by rule of court, especially in the absence of statute and in view of the fact that it does not affect the liability of the party sued.

Along with the foregoing argument, defendant’s counsel cite and rely on par. 9, ch. 51, Ill. Rev. Stat. 1939 [Jones Ill. Stats. Ann. 107.074], pertaining to “Evidence and Depositions,” which prescribes that courts shall have power in any action pending before them, upon motion, and good and sufficient cause shown, “and reasonable notice thereof given,” to require parties to produce books or writings in their possession which contain evidence pertinent to the issue. It is extremely doubtful whether this statute relates to the subject matter of this proceeding; it is usually invoked to procure an order of court to compel the production of books and papers which contain evidence pertinent to the issue. Such application is always directed to the court and granted only where good cause is shown, so as to prevent unnecessary and unfair disclosure of a litigant’s business affairs. It is not in any way analogous to the procedure invoked for the purpose of laying the foundation for the introduction of secondary evidence.

The remaining contention is that a resolution voting salary to an officer, especially when the corporation is insolvent, renders the action void. This proposition is predicated upon the theory that the directors of an insolvent corporation cannot give away its assets or use them to exonerate themselves to the injury of other creditors, and that if any of the directors are creditors of the corporation, they cannot secure any advantage or preference in the payment of their claims at the expense of other creditors. (Beach v. Miller, 130 Ill. 162.) The record in this proceeding shows that the company had lost some money in 1938, but there is no evidence that it was insolvent or that there were any unpaid creditors except the three officers whose salaries had not been paid in full. They had simply voted to issue to themselves promissory notes in lieu of the cash to which they were entitled as the unpaid portion of their salaries. Since the record does not disclose that there were any creditors who could possibly be injured by the transaction, and no fraud or unfairness appears to have been perpetrated upon anyone, we perceive no reason why plaintiff should be precluded from recovering on his lost promissory note. The salary he had earned was payable to him in cash and his willingness to accept the note in lieu thereof does not stamp the transaction as illegal. Whether the corporation wa<s making or losing money, no creditor or stockholder was injured thereby. The defense interposed is a technical one and there is no doubt that the note represents salary actually due plaintiff.

For the reasons indicated, we are of opinion that the judgment should be affirmed, and it is so ordered.

Judgment affirmed.

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