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    South East National Bank of Chicago, Appellee, v. Board of Education of the City of Chicago et al. Charles B. Scoville, Jr., Trustee of Estate of Charles B. Scoville, Deceased, Appellee, v. Board of Education of the City of Chicago et al. Waukesha Lime and Stone Company et al., Appellants.
    Gen. No. 40,352.

      Opinion filed December 30, 1938.

      Poppenhusen, Johnston, Thompson & Raymond and D’Anoona, Pflaum & Kohlsaat, both of Chicago, for appellants; Edward R. Johnston and Albert E. Jenner, Jr., of Chicago, of counsel.
    Joseph Sullivan, Mayer Goldberg and Benton Atwood, all of Chicago, for certain appellees.
    William A. Rogan and Joseph A. Richer, both of Chicago, for certain other appellees.
   Mr. Presiding Justice Burke

delivered the opinion of the court.

On June 21, 1938, at the instance of plaintiffs and intervenors, as holders and owners of $122,000 of unpaid tax warrants of the Board of Education of the City of Chicago, the circuit court of Cook county entered an order directing a temporary injunction to issue, restraining one group of respondents from seeking to enforce two money decrees, totalling $6,477,214.65, theretofore entered by the circuit court of Cook county against the Board of Education in two separate actions in favor of 286 plaintiff-holders (including 82 of the parties to these consolidated appeals) of $5,825,000 of unpaid 1929 tax anticipation warrants of the Board; another group of respondents from further prosecuting nine other proceedings brought by eleven holders (including seven of the parties to these consolidated appeals) of $820,000 of unpaid warrants against the Board of Education in the circuit and superior courts of Cook county, such proceedings being similar in character to the proceedings in which the money decrees were entered, and all holders of unpaid warrants from instituting further like proceedings against the Board upon any of the remaining $1,100,000 of unpaid 1929 tax anticipation warrants not already in suit, and from such interlocutory order respondents prosecute this and four other appeals. This appeal was consolidated for hearing with the appeals in cases Nos. 40,353, 40,354, 40,355 and 40,356.

In January, 1929, the city council of the city of Chicago, under the direction of the Board of Education, levied taxes for the year 1929 for educational, building and playground purposes, such levies being for the sums of $83,800,000, $37,813,000 and $975,000, respectively. On January 21, 1929, the city council, on request of the Board, authorized the issuance and sale of tax anticipation warrants drawn against and in anticipation of the collection of such tax levies in a sum not to exceed 75 per cent of the total amount of the respective levies. The warrants were payable solely from taxes when collected, and bore interest at 6 per cent per annum. From January to April, 1929, educational fund warrants in the aggregate amount of $46,800,000 were issued; on July 1, 1929, building warrants in the amount of $15',900,000 were issued, and $475,000 of playground fund warrants were also issued. The building and playground warrants were issued in one series, consecutively numbered, and in denominations of $1,000 and $5,000. The educational fund warrants were issued in two series, each series numbered consecutively, and the first aggregated $13,500,000 and the second $33,300,000. The majority of the educational fund warrants were in denominations of $1,000 and $5,000. A few of them were in denominations varying from $10,000 to $250,000. The warrants bore various maturity dates from July 1, 1930, to and including September 15, 1930. Although the taxes were leyied and the warrants issued during the period from January through July, 1929, the taxes were not extended by the county clerk until the spring of 1931. The delay was caused by the reassessment of all property in Cook county ordered by the State Tax Commission in the year 1928. The three tax levies were extended by the county clerk for collection, as follows:

Loss and Cost
Tax Purpose Total Extension of Collection Net Tax
(1) Educational $54,386,937.12 $5,438,693.71 $48,948,243.41
(2) Building 18,472,493.53 1,847,249.35 16,625,244.18
(3) Playground 554,174.80 55,417.48 498,757.32

The taxes were not put into collection until May, 1931, at which time the principal and accrued interest in each case exceeded substantially the probable net collectible tax. In the meantime the world-wide depression had set in, rendering the collection of taxes more difficult. The tax collections never equaled the principal amounts of warrants issued. The building and playground warrants were called and paid in numerical order. Of the educational warrants the first series was first retired. As to the second series the calls were for the most part for the retirement of the warrants in numerical order. Because of the serial method of payment the higher numbered warrants were not paid and are still outstanding. The lower numbered warrants were paid in full with accrued interest, to the exhaustion of the proceeds of the tax collections received. Of the educational warrants approximately $7,000,000 principal amount remain outstanding and unpaid. Of the building fund warrants approximately $2,900,000 principal amount remain outstanding and unpaid, and $65,000 remains outstanding and unpaid on the playground warrants. Interest had accrued on the unpaid educational warrants in the sum of $3,000,000, on the unpaid building warrants the sum $1,000,000, and on the unpaid playground warrants the sum of $35,000. By 1933 it became evident that the three tax funds would never be sufficient to pay the outstanding unpaid warrants and accrued interest in full. The legislature, in 1933, passed an act authorizing the Board to issue its general obligation bonds in an amount sufficient to pay the outstanding 1929 warrants in full, both as to principal and interest. The act was held unconstitutional in Berman v. Board of Education, 360 Ill. 535 (April, 1935). The great bulk of the payments on a pro tanto basis took place in the period 1931-1933, with a few payments in 1934 and the first five months of 1935. The Berman case concluded the first phase of the attempt to solve the 1929 Board of Education tax warrant problem. In chronological order, the next step was a proceeding filed in the United States District Court on July 14, 1935, by the Norfolk & Western Railway Company against the Board of Education, in which the railway sought, as the holder of $858,000 of unpaid educational and building warrants, (1) an accounting from the Board of the proceeds of the 1929 educational and building tax levies received by it, (2) a money decree against the Board for the pro rata share of such tax proceeds which it asserted should have been paid to it by the Board, and (3) an injunction against the Board restraining it from distributing 1929 tax proceeds then in its possession or collected in the future, other than upon a pro rata basis among the owners and holders of all outstanding unpaid warrants. The cause was tried before Hon. Charles E. Woodward, who on April 17, 1936, rendered his written opinion sustaining the railroad’s contentions. (Norfolk & Western Ry. Co. v. Board of Education, 14 F. Supp. 475.) He held that the warrants were payable solely from the proceeds of the taxes when received; that the tax proceeds upon receipt became and were a trust fund in the possession of the Board as trustee to which all warrant holders had equal title, so as to be entitled to pro rata distribution of the funds, and that when the Board, instead of distributing the trust fund equally among all warrant holders, distributed it among but a part of the warrant holders in full payment of the warrants held by them, to the damage of the remaining warrant holders, who received nothing because of the exhaustion of the tax funds by such method of distribution, it committed a breach of trust for which it was personally liable to holders of unpaid warrants as and for money had and received, in a sum equal to the amount which the unpaid warrant holder would have received had distribution been made pro rata. On May 4, 1936, a decree was entered by Judge Woodward in conformity with the opinion. The decree fixed the basis of recovery as “the proportion of all the moneys received as the proceeds of said . . . levy which the total amount of . . . warrants owned and held by plaintiff bears to the total amount of warrants issued against said . . . levy.” On appeal the circuit court of appeals, on February 10,1937, sustained the decree of the district court with one exception. Whereas the district court had enjoined the Board from distributing present and future tax proceeds other than on a pro rata basis, the circuit court of appeals held that the district court should have entered a mandatory decree directing immediate “payment of the taxes collected and on hand or hereafter to be collected to the satisfaction of outstanding warrants”; the distribution to be “among the warrant holders in the proportion which each warrant holding interest bears to all the outstanding unpaid bonds,” and that “for the balance due on an accounting a money decree should be entered in appellee’s favor against the board. ’ ’ On May 19, 1937, pursuant to the mandate of the circuit court of appeals, a supplemental decree was entered in the district court directing the Board upon appropriate published notice “promptly to distribute all moneys now in its hands or under its control, or which may at any time come into its hands or under its control as the proceeds of the collection of taxes levied for the year 1929 . . . among all warrant owners and holders of unpaid 1929 educational and building tax anticipation warrants proportionately and ratably in the proportion which the amount of each respective warrant owner holding interest . . . respectively bears to the amount of all outstanding and unpaid . . . warrants . . . remaining from time to time unpaid, such distribution . . . to be in each instance” exhaustive of the funds then on hand. On June 10, 1937, and March 1, 1938, pursuant to the supplemental decree, the Board made two pro rata distributions of accumulated 1929 tax funds applicable to 1929 educational, building, and playground warrants, aggregating $270 on each educational warrant, $220 on each building warrant, and $415 on each playground warrant. Bach of the plaintiffs and interveners received his pro rata distribution upon the warrants held by him. The accounting against the Board ordered in the original and supplemental decree was taken before master in Chancery Irving R. Herriott, during the fall and winter of 1937-38, and on May 15, 1938, he rendered his report. The master recommended that there be allowed statutory interest at 5 per cent on each amount which should have been paid to the warrant holder from the date when each pro rata payment should have been made. The 6 per cent interest recited on the face of the warrant was allowed upon the full principal amount of each warrant to the date of first distribution, and thereafter upon the balance of principal which would have remained from time to time had pro rata distribution been made. The report was filed May 27, 1938, and is now pending for disposition.

On February 22, 1936, 71 owners and holders of unpaid educational and building warrants filed their complaint in equity in the circuit court in the cause entitled Chicago City Bank and Trust Company et al. v. Board of Education et al. That cause involved warrants in the principal amount of $2,007,000, of which $1,587,000 were educational warrants and $420,000 were building warrants'. On July 18, 1936, a proceeding identical with the Norfolk & Western Ry. Co. case was filed in the United States District Court by five holders of $1,382,000 unpaid warrants, of which $587,000 were educational and $795,000 were building warrants. This cause, entitled Union Trust Co. of Pittsburgh et al. v. Board of Education, was heard before Judge Woodward and a decree, as in the Railway case, was entered on July .13, 1937. The accounting was taken at the same time as in the Railway case and the master’s report in the latter case applies to the Union Trust Company case. On September 9, 1936, a case entitled Irving K. Hutchinson et al. v. Board of Education et al. was filed in the circuit court by 213 holders of $3,048,000 educational warrants, $730,000 building warrants, and $30,000 playground warrants. Respondent Commerce Trust Company filed its action in the circuit court on August 19, 1936, alleging- ownership of $260,000 of educational warrants. Plaintiff South East National Bank of Chicago filed its complaint on August 2, 1937, which was more than two years after the Railway Company case, more than a year after the published opinion rendered in that case by Judge Woodward, and more than a year after the filing of the Chicago City Bank and the Hutchinson cases. South East Bank asserted ownership of four educational warrants aggregating $16,000. The complaint sought judgment only against Board of Education and on the same basis as was urged in the other cases. Respondent Louis Oppenstein, claiming ownership of $25,000 educational warrants and $5,000 building warrants, filed his action in the circuit court August 19, 1937; and the Diamond Coal Co., as holder of $5,000 educational warrants, filed its suit in the circuit court October 10, 1937. Plaintiff Charles B. Scoville, Jr., filed his complaint in the circuit court on November 17, 1937, more than two years after the Railway Company case was filed, almost one and one-half years after the opinion and decree of Judge Woodward, ten months after the opinion of the circuit court of appeals, and almost two years after the filing of the Hutchinson, Chicago City Bank and Commerce Trust Company cases. Scoville asserted ownership of six building warrants aggregating $30,000. His first count sought judgment against the Board on the same basis as in the other cases. Subsequent to the Scoville suit, and in February, March and April, 1938, five additional suits (including the separate suits of five of the respondents who join in these appeals) were filed — four in the circuit court and one in the superior court — by eight separate plaintiffs, alleging ownership of $380,000 of educational warrants, $110,000 of building warrants, and $35,000 of playground warrants. Cochran and Jacobs, who also petitioned for the injunction, did not intervene until December 10, 1937, and March 18, 1938, respectively. They alleged that they were the owners of educational warrants in the sums of $1,000 and $75,000, respectively. Cochran acquired his warrants in December, 1937, and Jacobs, in March, 1938. The South East Bank and Scoville complaints were filed by plaintiffs on their own behalf and on behalf of all other owners and holders of the 1929 tax anticipation warrants of the Board. The original complaint in the South East Bank case was a one count case and sought a money decree. It was similar to and sought the same relief as the other cases which were then pending. On November 19, 1937, an amended complaint, consisting of two counts, was filed. The first count was a repetition of the original complaint. This pleading recited that it was brought on behalf of the plaintiff and all holders and owners of outstanding unpaid educational warrants and asked a money decree against the Board for the separate pro rata amounts of taxes due each holder of unpaid educational warrants, and that the respective amounts so found due be required to be paid by the Board to a receiver to be appointed by the court, who was thereafter to “discover” the owners of the unpaid educational warrants and to distribute the proceeds of any decree or decrees which might be entered against the Board. The pendency of the Railway, the Chicago City Bank and Oppenstein cases was alleged and an injunction against further prosecution thereof asked. An injunction was also sought to prevent all other holders of educational warrants from instituting or prosecuting any suit seeking the same relief against the Board as was being sought under count I. It was also alleged that all holders of unpaid educational warrants had claims against the Board of a nature and character similar to those of plaintiff; that all of the other holders had a common interest in the subject matter of the suit, in said funds derived from the collection of taxes for the year 1929 for educational purposes, and in causes of action asserted and recoveries to be effected therein; that such other persons constituted a class with plaintiff having claims with plaintiff involving common questions of law and fact; that with the filing of the complaint" the court had obtained prior and exclusive jurisdiction of the subject matter of the proceeding and was therefore entitled to retain the same against any and all proceedings which might be subsequently filed to enforce the same causes of action, and which have been filed for the purpose, if they be not representative in character; that injunctive relief was necessary to protect and preserve such jurisdiction and to insure orderly procedure in the prosecution of the causes of action stated in the complaint, and in the distribution of recoveries; that the other cases pending against the Board were not representative in character, although they were brought to enforce the same cause of action against the Board as plaintiff sought to enforce in its suit; that plaintiff was required to employ experienced and competent counsel, to whom it had become liable for reasonable fees, and that plaintiff was entitled to be reimbursed for its attorneys’ fees, costs and expenses, out of the proceeds of any collections recovered in the action. Count II sought recovery on behalf of plaintiff and all other owners and holders of unpaid 1929 educational warrants from those former owners and holders of 1929 educational warrants who had been paid in full by the Board, for the excess of the proceeds of the 1929 educational tax funds received over and above the amount which such “paid” warrant holders would have received had the tax fund been distributed pro rata. On the same day that the amended complaint was filed in the South East Bank case, Scoville filed his complaint, consisting of two counts, identical with the amended complaint in the South East Bank case, except that it was confined to building warrants. On December 10, 1937, the South East Bank and Scoville eases were consolidated. On December 11, 1937, an order was entered in the consolidated causes appointing Arthur R. Thompson receiver and authorizing* him to collect and receive the excess of tax funds received by “paid” warrant holders from the Board, to receive any and all other moneys, securities and property which may be ordered paid to him, and granting* leave to retain attorneys. On March 4, 1938, counts II of the consolidated complaints were amended so as to add additional parties defendant. Such additional parties were alleged to have held 1929 building and educational warrants which had been paid in full as to principal and interest. On March 4, 3938, an order was entered setting the first count of the consolidated proceedings for trial. The trial began April 13, 1938. Plaintiffs’ proofs were completed April 15, 1938, and defendants’ proofs thereafter. On May 20, 1938, plaintiffs moved for the entry of a money decree based on count I, against the Board and in favor of plaintiffs, for the individual pro rata amounts, and the motion was taken under advisement. Certain defendants to counts II filed motions to dismiss and strike that count, which motions were argued orally. On May 24, 1938, the motions to dismiss were overruled and such defendants, on June 13, 1938, filed their answers. There are 47 individual defendants to count II in the South East Bank complaint and 67 defendants to count II of the Scoville complaint. The answers are of great length. One of the major defenses in all the ansAvers is that the particular bank, investment house or trust company charged with having received payment in full on warrants, in fact acted merely as agent for other persons, firms and corporations, for the purpose of collecting from the Board and distributing the same to their principals. The answers of six banks and investment houses state that collections were made on behalf of 822 different owners and holders of educational and building warrants over a period from June, 1931, to April, 1935, the bulk thereof taking place in the years 1931, 1932 and 1933. The answers set forth the residences of each of the persons, firms and corporations on Avhose behalf collection was made, showing that they reside in practically every State in the union. Each answer also attacked the validity of the - consolidated cases as proper representative actions, and urged the statute of limitations and laches and estoppel. They also asserted good faith in making the collections, and lack of any knowledge respecting any claim of wrongdoing. The answers also asserted that plaintiffs and others on whose behalf plaintiffs brought suit acquired their warrants subsequent to the time payments were made to defendants either on their own account or for the account of others; that the Board was solvent and fully financially responsible, and that plaintiffs had as much knowledge concerning the levy, collection and distribution of the tax funds as did defendants.

On May 3, 1938, Cochran and Jacobs filed their verified petition for an injunction asking that the further prosecution of all pending actions, except the Railway, Hutchinson and Chicago City Bank cases, be enjoined, and also asking an injunction against all other holders of educational warrants, restraining them from instituting actions against the Board. The right to an injunction was based upon the theory that the consolidated causes were representative proceedings while the other pending cases were not. Notice of the presentation of the petition was given to various defendants. On May 20, 1938, a separate verified petition for injunction was filed by plaintiffs. Such petition sought to enjoin the further prosecution of all pending suits, the institution of further actions, and the enforcement of the money decrees. The petition asked that the temporary restraining order remain in effect until the entry of final decrees upon the issues raised under counts II of the consolidated complaints. In support of plaintiffs’ application for injunction it was alleged that the purpose of the consolidated causes was to enforce the liability of the several defendants so as to replenish and restore the tax trust fund dissipated by the Board; that such liabilities and recoveries would take the place of the dissipated fund, and that the aggregate of all the liabilities of the defendants and all moneys collected thereon, constitute a trust fund for the equal and common benefit of all owners and holders of said unpaid tax anticipation warrants; that the trust fund should be collected, administered and distributed by the court for the equal and common benefit of all of the owners and holders on whose behalf the case is being maintained, and that the case involves the administration of a trust, the trust res or estate being the liabilities of all defendants ; that the original tax fund was insufficient to pay all outstanding warrants; that the trust fund composed of the liabilities of all the defendants in each of the consolidated cases, would likewise be insufficient to pay in full the amounts due on the unpaid warrants; that the tax funds on hand with the Board and the aggregate of liabilities were the only sources for payments on the outstanding warrants; that the ‘‘Board ... is unable presently to pay any part of any decree which may be rendered against it herein; . . . that full collection of any decree against said Board . . . may not be made for many years; . . .” that many of the defendants under count II were insolvent; that the taxes on hand and the aggregate of liabilities must be collected and distributed and disbursed equally among all holders of unpaid warrants so that none of them shall obtain an unfair preference either as to amount or time of payment; that all holders of outstanding warrants have a common and identical interest in the question of fact and law involved, in the controversy presented, in the relief sought, in the liabilities and trust fund, to be collected, and in the trust to be administered in each of said consolidated cases; that the owners and holders of outstanding warrants numbered several hundred; that they were scattered throughout the United States; that many of them could not be reached through the service of process; that the warrants which are payable to bearer were being constantly transferred, and that the identity and whereabouts of the present owners and holders were unknown to plaintiffs; that it would therefore be impracticable and-actually impossible to join all of the holders of outstanding warrants; that the liabilities of all defendants must be adjusted and marshaled as between them, and the trust or common fund must be marshaled as to the rights or liabilities of all persons interested; that the liability of the Board to certain holders of unpaid warrants will be reduced pro tanto by any payment by other defendants on account of their liability; that such marshaling and adjustment of liabilities could only be made in a representative suit in equity on behalf of all claimants and holders of unpaid warrants; that by the filing of the representative suits the court had obtained prior and exclusive jurisdiction in rem over the administration of the purported trust involved, to the exclusion of the other pending suits which were not class or representative suits, and which did not attempt to marshal the claims against the Board and the paid warrant holders; that with the filing of the original complaint in the South East Bank case on August 2, 1937, the court had acquired complete and exclusive jurisdiction of the trust res composed of liabilities of all defendants to such an extent that no other court had power or jurisdiction at any time thereafter to enter any judgment or decree in favor of any owner or holder of said unpaid tax anticipation warrants; that certain claimants might procure decrees for more than their proportionate interest of the alleged fund or liability; that the plaintiffs in the Federal cases seek to obtain a larger percentage of said liability than was decreed in the State cases; that the plaintiffs who have already obtained decrees may have been decreed a larger, percentage than will ultimately be decreed to plaintiffs in the consolidated cases; that some of the plaintiffs in the pending suits and some of the plaintiffs who have obtained decrees have been paid in full as to some warrants once held by them, and that they would therefore procure an unfair advantage in not being required in their individual suits to account for and pay over moneys received by them in excess of their pro rata share; that warrant holders in other suits would procure a priority as to time of payment, and that they would be able to enforce their prior judgments or decrees and procure satisfaction before any judgment or decree might be entered in the consolidated cases; that counsel representing plaintiffs in the other pending suits had knowledge of the pend-ency of the representative proceedings, but had continued to prosecute said other cases and to obtain money decrees.

The parties plaintiff in the two Federal cases filed petitions for injunction before Judge Woodward seeking to enjoin plaintiffs and interveners in the consolidated cause from interfering with the prosecution of the Federal cases or the enforcement of the decrees. Plaintiffs appeared, answered and defended against the application for an injunction. Nevertheless, on June 6, 1938, Judge Woodward found the issues against plaintiffs in the consolidated cause and .on June 13,1938, enjoined them as prayed. Judge Woodward found that both counts in the consolidated cases sought to enforce claims in personam and not in rem; that the liability of the Board was personal, which was likewise true of the liability, if any, of the “paid” warrant holders; that the relief sought in the Federal cases was confined to relief against the Board; that an attempt was being made in the consolidated cases to assert a liability against the paid warrant holders; that the further prosecution of the Federal court actions would in no wise interfere with the jurisdiction of the circuit court in the consolidated cases, nor with the orderly and due prosecution thereof, and that the parties in the Federal cases had a right to continue to maintain their causes free from interference by plaintiffs. Plaintiffs and coplaintiffs in the consolidated cause prosecuted an appeal from the district court to the circuit court of appeals, where it is now pending. Verified answers to the petitions for injunctions were filed by the loop banks and by the Board. The Board alleged that the other pending cases were being actively prosecuted; denied that the rights of plaintiffs in the other cases could be adequately determined in the consolidated cause; and alleged that the consolidated cause was entirely different from the other cases, and that the consolidated cause was not a representative proceeding. Bertha D. Baur filed her answer and alleged that she was proceeding solely against the Board; that the Board was not insolvent but was fully able to meet and discharge its obligations; that the liability of the Board to her was a personal liability, primary and absolute and not subordinate to or contingent or dependent upon the liability, if any, of persons who received 1929 tax moneys in payment and discharge of their warrants; that the further prosecution of her suit would in no way interfere with the consolidated causes, and that in any event she held and was suing upon $35,000 of playground warrants which the consolidated causes did not purport to cover. No answers or appearances were filed on behalf of the parties in the remaining pending cases other than the Waukesha Lime & Stone Co. and Hutchinson cases. However, the 71 plaintiffs in the Chicago City Bank case and the plaintiffs in the Commerce Trust, Oppenstein, Levin and Tauchen cases have joined in the prosecution of these consolidated appeals. Some respondents filed special and limited appearances supported by affidavits showing that they have not been personally served with summonses or with notice and that they were not parties defendant to the consolidated causes. Henry Crown filed a verified answer to each petition, the allegations of which are substantially the same as heretofore outlined. The Crown answer also sets forth that the Waukesha case was filed in April, 1938; that on the very day the Cochran petition for injunction was filed, a final decree, which had been checked and approved by counsel for the Board, was presented to Judge Prystalski for entry; that the proffered decree was not entered only because the petition for an injunction was filed. Each of the three parties to the Waukesha case has joined in these consolidated appeals. Of the 213 parties to the Hutchinson case, in whose favor money decrees had been entered April 13, 1938 (nunc pro tunc as of April 1, 1938), special and limited appearances were filed by II. Earl Hoover of Chicago, Emile Kahn of New Orleans and Automobile Club of Michigan, a Michigan corporation, holders of $55,000 of warrants, all of whom are parties to these appeals. The supporting affidavit stated that none of said persons had been served with summons, process or other notice and specifically recited that the employment of attorneys on whom notice was served, had terminated on April 18, 1938, prior to the service of notice, and that said attorneys had no right or authority to represent such specially appearing respondents. A detailed, verified answer was filed on behalf of various other parties to the Hutchinson case. The answer alleged that respondents had no knowledge of the pendency or progress of the consolidated causes other than such as they had gathered from an examination of the court files preliminary to filing their answer; denied that the consolidated causes were proper representative proceedings or that plaintiffs therein were asserting or could assert any cause or causes of action on behalf of respondents; alleged that the “aggregate of liabilities” theory of representative suit was legally unsound; that the causes of action sustained by respondents "in the Hutchinsoncase and the causes of action asserted in the consolidated causes were purely personal actions and did not and could not involve or constitute a trust res; that in any event respondents were not and could not interfere with counts II as none of their actions sought to enforce the purported causes of action set np therein; denied that the Board was presently unable to pay money decrees entered and to be entered against it, but asserted that any such decrees would promptly be paid; alleged that aside from the fact that the Board was a municipality having power to levy taxes to pay any judgments entered against it, the money decrees against the Board would promptly be paid by virtue of an Act of the Illinois G-eneral Assembly, in force July 20, 1937, authorizing the Board to issue its bonds to pay (from the proceeds of sale thereof) the money judgments or decrees entered against it in respect of the unpaid tax warrants; that on April 20, 1938, promptly following the entry of the two money decrees in the Hutchinson and Chicago City Bank cases (aggregating $6,478,114.65) the Board had proceeded to adopt the resolutions necessary to issue $6,595,393.26 of its 3% per cent bonds pursuant to the act, so as to pay said money decrees (upon which interest at 5 per cent is accruing) with the proceeds of the sale of the bonds; that the resolution, together with a form of ordinance to be adopted by the city council authorizing the issuance of the bonds, had been deposited with the city clerk and referred to the finance committee of the city council for approval, before which committee the same was pending at the time the petitions for injunction were filed; that the plaintiffs’ attorneys in the consolidated cases were attorneys for the 71 parties plaintiff in the Chicago City Bank case and knew of the pendency of that case and of the progress thereof from the time it was filed in February, 1936, to the entry of the decree in March, 1938; that although full knowledge of pending litigation was had by the three counsel for plaintiffs from the day of the filing of the Chicago City Bank case (in which one was a party, another an active counsel for the warrant holders, and the last an employee of an “attorney-party, ” actively reporting the course of progress of all suits), no attempt was made to enjoin the other actions until May, 1938, more than 27 months after such counsel instituted, took part in, and prosecuted to decree one of the cases sought to lie enjoined; that two pro rata distributions of current tax collections in June, 1937, and March, 1938, made pursuant to the supplemental decree entered by Judge Woodward, were accepted by plaintiffs; that upon the entry of the final decrees in the Hutchinson and Chicago City Bank cases there was stamped by the Board upon the $5,815,000 of warrants involved in those cases a notice of the entry of judgment; that respondents in the Hutchinson case had employed counsel who had proceeded with the cause, had secured the entry of a final money decree of $4,243,707.63, and had been paid in full for their services; that expensive and costly proceedings had been had in the Chicago City Bank case, and a final decree of $2,234,407.02 secured; that the effect of the injunction would be merely to force respondents and their coparties to pay considerable expenses and an additional and wholly unnecessary fee to the attorneys for plaintiffs and interveners and to the receiver and his attorney for doing over again the work which respondents’ attorneys had already completed; that an attorney who acted as counsel in the Chicago City Bank case would receive double payment, once for having secured a decree for his clients in that case, and again in the consolidated" cases; and that one attorney, also a party, would receive a fee for having enjoined a money decree theretofore entered in his favor; that the inevitable result of the injunction would be to cause great delay in enforcing the decrees in the Hutchinson and Chicago City Bank cases and in the two Federal cases, and would entail great and needless expense and protracted and bitterly contested litigation; that many of the parties to the Hutchinson case, in reliance upon the final decree entered thérein, had assigned their decretal judgments to others; that plaintiff's and their counsel were not only prejudicing respondents, but were seeking personally to profit at the expense of respondents from the successful proceedings in the State and Federal courts which had been pioneered and carried on by the parties to those cases at great expense and perseverance; that the money decrees in the Hutchinson case in favor of respondents Western Shade Cloth Company and Victor S. Peters were unit judgments which included pro rata recovery on playground warrants ; that because of that fact the injunction against educational and building warrants would prevent enforcement of the playground warrant portion of the judgment, since they could not be separated; that the injunction would have the effect of suspending the proceedings of the Board for the issuance of its bonds; and as having a bearing upon the equities, the answer sets forth the great discrepancy between the holdings of plaintiffs and those of the group sought to be enjoined, points out that plaintiffs held $46,000 of warrants and their intervening coplaintiffs held $76,000, or a total of $122,000, as against warrants in the sum of $8,875,000 owned and held by parties to other cases; that 88 per cent of the outstanding warrants were owned by parties to other cases and only twelve one-hundredths of one per cent owned or held by plaintiffs; that two distributions of current tax collections had been made pursuant to the supplemental decree in the district court; that plaintiffs and intervenors had accepted and received their shares; that having done so they were bound by the decree and charged with full notice of the proceeding; that parties to the other cases are not in the same position as plaintiffs since many of them have taken judgments on the warrants and otherwise changed their positions; that plaintiffs are asserting rights against rather than on behalf of respondents; that the ■ consolidated cause differs from the other causes in that the other pending suits are against the Board alone while the consolidated causes include numerous defendants who are alleged to have received payment in full for warrants held by them; that consequently plaintiffs are not true representatives of the class; denied that they have obtained or could obtain any priority or preference by virtue of the decrees entered and to be entered against the Board in other cases, since the claims of respondents and all other holders of unpaid warrants are purely individual claims; alleged that they did not seek and have not secured any interest in a common fund, but have merely sought and secured an individual money judgment, and that all holders of unpaid warrants are entitled to the same judgment against the Board; that respondents are not interested in the alleged causes of action sought to be enforced against former holders of warrants, preferring to rely upon the individual judgments against the Board and upon the distribution of current tax collections pursuant to the supplemental decree in the Railway case; that since they assert no such purported causes of action as set forth in count II it could not be said they were interfering therewith; that the relief sought against the Board under counts I of the consolidated complaints is precisely the same as has been decreed in the two State and two Federal court cases, and the same as is being sought in the other pending- cases.

As plaintiffs did not file a reply to the answers of respondents the allegations thereof stand admitted.

Bespondents argue that the consolidated causes do not state a true representative suit. If the contention is valid it follows that the temporary injunction should not háve been allowed. The terms “representative suit” and “class suit” are used interchangeably. Generally the word “representative” refers to the named individuals actually bringing the action, while the word “class” embraces the entire group which the named persons purport to represent. Hence, such an action is “representative” in that the named persons represent all those in the class, and it is a “class” action in that all persons in the class are before the court by representation. A representative action is not such merely because the parties so designate it. Whether it falls into that category depends on the facts of the particular case. In a true (plaintiff) class action those who are within the class should not be made defendants, as they are in court through the actions of their representatives. Both parties cite the scholarly exposition of the law by Mr. Justice Story in his Commentaries on Equity Pleadings and draw therefrom support for their respective theories. As pertinent to the discussion we quote certain language taken from Story’s Equity Pleadings (9th Ed.):

“Sec. 76a. [p. 71] The general rule, in courts of equity, as to parties, is that all persons materially interested in the subject-matter, oug*ht to be made parties to the suit, either as plaintiffs, or as defendants, however numerous they may be, in order, not only that complete justice may be done, and that multiplicity of suits may be prevented; or, as the rule was once stated by Lord Hardwicke, that all persons ouglit to be made parties before the court, who are necessary to make the determination complete, and to quiet the question. . . .

“Sec. 76b. [p. 72] It- has also been suggested, that it would be a more just exposition of the general rule, to declare that all persons interested in the object of the suit ought to be made parties. Undoubtedly this does furnish a safe and satisfactory guide in many cases of ordinary practice; but it may admit of doubt whether it is universally true, or whether it is not equally as open to criticism as is the common formulary, in which the rule is expressed. . . .

“Sec, 76c. [p. 73] The truth is, that the general rule in relation to parties, does not seem to be founded on any positive and uniform principle; and therefore it does not admit of being expounded by the application of any universal theorem, as a test. It is a rule founded partly in artificial reasoning, partly in considerations of convenience, partly in the solicitude of courts of equity to suppress multifarious litigation, and partly in the dictate of natural justice, that the rights of persons ought not to be affected in any suit, without giving them an opportunity to defend them. Whether, therefore, the common formulary be adopted, that all persons materially interested in the suit, or in the subject of the suit, ought to be made parties, or that all persons materially interested in the object of the suit, ought to be made parties, we express but a general truth in the application of the doctrine, which is useful and valuable, indeed, as a practical guide, but is still open to exceptions, and qualifications, and - limitations, the nature and extent and application of which are not, and cannot, independently of judicial decision, be always clearly defined. On this account it is of great importance to ascertain, what are the admitted exceptions to the general rule, and to ascertain what are the grounds on which they are founded; for when these exceptions, and the grounds thereof, are fully seen and explained, they will furnish strong lights to guide us in our endeavors to apply the rule and the exceptions to new cases, as they arise in judgment. . . .

“Sec. 77. [p. 78] . . . All these exceptions will be found to be governed by one and the same principle, which is, that, as the object of the general rule is to accomplish the purposes of justice between, all the parties in interest, and it is a rule founded, in some sort, upon public convenience and policy, rather than upon positive principles of municipal or general jurisprudence, courts of equity will not suffer it to be so applied as to defeat the very purposes of justice, if they can dispose of the merits of the case before them without prejudice to the rights or interests of other persons, who are not parties, or if the circumstances of the case render the application of the rule wholly impracticable. On the other hand, if complete justice between the parties before the court cannot be done without others being made parties, whose rights or interests will be prejudiced by a decree, then the court will altogether stay its proceedings, even though those other parties cannot be brought before the court; for in such cases the court will not, by its endeavors to do justice between the parties before it, risk the doing of positive injustice to other parties not before it, whose claims are or may be equally meritorious.

“Sec. 96. In truth, the same general principle pervades the whole course of equity proceedings, in all these apparently irreconcilable or anomalous cases. It has been well observed, that the general rule, being established for the convenient administration of justice, ought not to be adhered to in cases, in which, consistently with practical convenience, it is incapable of application; for then it would destroy the very purpose for which it was established. The exceptions, therefore, turn upon the same principle, upon which the rule is founded. They are resolvable into this, either that the court must wholly deny the plaintiff the equitable relief, to which he is entitled, or that the relief must be granted without making other persons parties. The latter is deemed the least evil, whenever the court can proceed to do justice between the parties before it, without disturbing the rights or injuring the interests of the absent parties, who are equally entitled to its protection. And even in the cases in which the court will thus administer relief, so solicitous is it to attain the purposes of substantial justice, that it will generally require the bill to be filed, not only in behalf of the plaintiff, but also in behalf of all other persons interested, who are not directly made parties (although in a sense they are thus made so), so that they may come in under the decree, and take the benefit of it, or show it to be erroneous, or entitle themselves to a rehearing. The court will go further, and in such cases, it will entertain a bill, or petition, which shall bring the rights and interests of the absent parties more distinctly before the court, if there is any certainty, or even any danger, of.injury or .injustice to them. We shall presently see this doctrine fully borne out, when we advert to the cases, which illustrate the nature, and character, and extent of this class of exceptions.

“Sec. 97. [p. 95] The most usual cases arranging themselves under this head of exceptions are, (1.) where the question is one of a common or general interest, and one or more sue, or defend for the benefit of the whole; (2.) where the parties form a voluntary association for public or private purposes, and those, who sue, or defend, may fairly be presumed to represent the rights and interests of the whole; (3.) where the parties are very numerous, and although they have, or may have separate, distinct interests; yet it is impracticable to bring them all before the court.

“Sec. 98. [p. 95] In the first of this class of cases, •may be included suits brought by a part of the crew of ;'a :privateer against prize agents for an account,' and their proportion of the prize money. In a case of this nature, if the bill be brought by a few of the crew, on behalf of themselves only, it will not be sustained. But if it be brought on behalf of themselves, and all the rest of the crew, who had signed the articles, and had not received their shares of the prize money, it will be sustained, from the manifest inconvenience of adopting any other course. And as it has been well observed, that no case can call more strongly for indulgence, than where a number of seamen have interests in the same subject-matter; for their situation at any period, how many are living at any one given time, how many are dead, and who are entitled to representation, cannot ordinarily be ascertained.

“Sec. 99. [p. 96] Similar reasons have induced the court to depart from the general rule in another class of cases, where the suit is brought on behalf of many persons in the same interest, and all the persons answering that description cannot easily be discovered or ascertained. Thus, a few creditors may maintain a suit on behalf of themselves and all the other creditors of a deceased debtor, against his proper representatives for an account and application of his assets, real as well as personal, in payment of their demands.

“Sec. 107. [p. 107] The second class of cases, constituting an exception to the general rule, and already alluded to, is, where the parties form a voluntary association for public or private purposes, and those who sue or defend, may fairly be presumed to represent the rights and interests of the whole. In cases of this sort the persons interested are commonly numerous, and any attempt to unite. them all in the suit would be, even if practicable, exceedingly inconvenient, and would subject the proceedings to the danger of perpetual abatements, and other impediments, arising from intermediate deaths, or other accidents, or changes of interest. Under such circumstances, as there is a privity of interest, the court will allow a bill to be brought by some of the parties on behalf of themselves and all the others, taking care, that there shall be a due representation of all substantial interests before the court. And such a bill must be brought on behalf of all the parties in interest; for if it be brought for the plaintiffs alone, it will not be sustained by the court for want of proper parties.

“Sec. 120. [p. 115] The third class of cases already alluded to as constituting an exception to the general rule, as to parties, is, where the parties are very numerous, and although they have, or may have, separate and distinct interests, yet it is impracticable to bring them all before the court, and, on this account, they are dispensed with. In this class of cases, there is usually a privity of interest between the parties; but such a privity is not the foundation of the exception. On the contrary, it is sustained in some cases, where no such privity exists. However, in all of them there always exists a common interest, or a common right, which the bill seeks to establish and enforce, or a general claim or privilege, which it seeks to establish, or to narrow, or take away. It is obvious, that under such circumstances, the interests of persons, not actual parties to the suit, may be in some measure affected by the decree; but the suit is nevertheless permitted to proceed without them, in order to prevent a total failure of justice. Indeed, in most, if not in all, cases of this sort, the decree obtained upon such a bill will ordinarily be held binding upon all other persons standing in the same predicament, the court taking care that sufficient persons are before it, honestly, fairly, and fully, to ascertain and try the general right in contest.

“Sec. 121. [p. 116] Thus, for example, bills have been permitted to be brought by the lord of a manor against some of the tenants, or vice versa, by some of the tenants on behalf of themselves and all the other tenants, against' the lord, to establish some right; such, for instance, as a bill with regard to suit to a mill, or a right of common, or a right to cut turf. In like manner, a bill has been permitted to be brought by the parson of a parish against some of the parishioners, to establish a general right to tithes, and the others have been bound by the decree made in the suit; and conversely, a bill has been permitted to be brought by some of the parishioners, on behalf of all, against the parson, to establish a parochial modus. So, where all the inhabitants of a parish had a right of common under a trust, a suit has been permitted to be brought by one, on behalf of himself and all the other inhabitants. In all these cases, although there were, or might be, distinct interests in the different tenants or parishioners; yet there was a general right and privity between them, as to the claim, asserted in the bill; and, therefore, the suit was held to be well instituted. ...

“Sec. 124. [p. 118] But bills have also been allowed to be brought (called bills .of peace), where there has been a general right claimed by the plaintiff, and yet no privity existed between the plaintiff and the defendants, and no general right on the part of the defendants, and where many more were, or might be concerned, than those brought before the court. In such cases, however, the right claimed by the plaintiff affected the defendants and all others in the same way, and they had, or might have, a common interest to resist it. Thus, for example, the city of London brought a bill to establish its right to a certain duty, and the bill was against a few persons only, who dealt in those things, of which the duty was claimed; and the bill was maintained by the court, notwithstanding the objection, that all the subjects of the realm might be concerned in the right. In such a case, a great number of actions might otherwise be brought, and almost interminable litigation would ensue; and, therefore, the court suffered the bill to proceed, although the defendants might make distinct defences, and although there was no privity between them and the city.

“Sec. 125. [p. 119] So, where a bill was brought to quiet the plaintiffs’ right of fishery in the river Ouse, of which the plaintiffs claimed the sole fishery for a large tract against the defendants, who (as the bill suggested) claimed several rights, either as lords of manors, or as occupiers of the adjacent lands, and also for a discovery and account of the fish, which they had taken; an objection was taken, that there was no privity between the defendants, but that the bill treated them as distinct trespassers, and that there was no general right to be established against them. The court, however, sustained the bill; for there was a general right of a sole fishery asserted by the plaintiffs against all the defendants; and the defendants were not precluded from setting up distinct exemptions and distinct rights in their defence. The benefit to be obtained by such a bill, under such circumstances, is, that they may furnish a ground to quiet the general right, not only as to the persons before the court, but as to all others in the same predicament.

“Sec. 126. [p. 120] In all these classes of cases, it is apparent, that all the parties stand, or are supposed to stand, in the same situation, and have one common right, or one common interest, the operation and protection of which will be for the common benefit of all, and cannot be to the injury of any. It is under such circumstances, and with such objects, that the bill is permitted to be filed by a few, on behalf of themselves and all others, or against a few, and yet to bind the rights and interests of the others. But, if the bill is filed by the plaintiffs, on behalf of themselves only, and not on behalf of all the other persons in interest, the bill would be unmaintainable, and be held bad on demurrer. . . .

“Sec. 130. [p. 123] But although the numerousness of parties, as well as their being unknown, constitutes, or may. constitute, a good ground for dispensing with their being made actual parties to a suit in the classes or cases before mentioned; yet as has been already stated, this exception has not been allowed to operate, without such qualifications, where the decree must directly affect the interests of the persons not before the court, and they have a right and an interest to be heard before the decree is made. A few illustrations of these qualifications upon the generality of this exception may here be properly suggested from adjudged cases.

“Sec. 131. [p. 123] Thus, for example, where a suit was brought by a few members of a voluntary society, called the Benevolent Union Society, consisting of sixty-one members, on behalf of themselves and all other members, for an account and injunction against the six defendants, who were trustees and members of the society, intrusted with the stock of the society, who had, in breach of the articles of the society, sold out a part of it, and proceeded to dissolve the society; and it appeared, that by the articles it was a material part of the contract, that the society should never be dissolved, so long as seven members should support the same; and it further appeared, that all the other members (forty-seven in number), except the plaintiffs, had received their shares, and the plaintiffs’ shares were in court. It was held, that all the other forty-seven members ought to have been made parties, as they had a direct interest in the decree to be made upon the bill, seeking, as it did, a replacement of the stock, and a continuance of the society. In such a case it is clear, that the real question was, whether there could be a dissolution of the partnership and a division of the funds, or not, consistently with the articles; and in that question all the members had an equal interest to be heard, and to be protected.

“Sec. 131a. [p. 123] So, where one of thirty-eight proprietors of a newspaper was appointed bookseller, and received the moneys of the concern, it was held, on a bill brought by twelve of the proprietors on behalf of themselves and all the other proprietors for an account, that the remaining twenty-five proprietors ought to be made parties by name, since it did not appear that the suit was necessarily for their benefit.

“Sec. 132. [p. 124] Upon similar grounds it has been held, that a shareholder in a joint-stock company cannot file a bill on behalf of himself and all other shareholders for a dissolution of the concern; but they must all be made actual parties to the suit, however numerous, and however impracticable it may be under such circumstances to proceed to a decree; upon the ground that it is by no means a general principle in equity, that all cases within the same mischief, as to parties, are to be held relievable simply on account of their numerousness, if the parties not before the court have a substantial interest in the very question of right, on which the decree must hinge. But this doctrine seems open to great doubt and difficulty; and indeed it tends to make a rule, designed to attain the purposes of general justice, the instrument of an utter denial of all justice, where the interests of all parties are not, or may not be exactly coincident. It has been accordingly greatly qualified, if not positively overturned, in the more recent authorities.”

An examination of the cases mentioned in the briefs discloses that nearly all of them rely on passages from Story’s treatise. The authorities leave the impression that care must be exercised in applying the principles to the factual situations involved. We shall consider the principles discussed by Story in the light of the facts of this case. In Rothschild v. Village of Calumet Park, 350 Ill. 330, which case involved special assessment bonds, the court said (pp. 341, 342): “. . . When the municipality which has made the improvement and collected the money to pay the bonds used in its construction fails in its duty to pay the bondholders, the latter may enforce their rights in accordance with the rules which prevail in other cases where money has been received to the use of another and retained without his knowledge.

“Objection is also made to the decree because it is said that it does not appear that the city has paid the money it has collected to bondholders other than the defendant in error or that it has improperly paid to other bondholders more than their proportionate share. That is no answer to the claim of the defendant in error. His complaint is that the village collected the money for the payment of all the bondholders pro rata and that it did not pay him pro rata— not that it paid somebody else more than his share. It is argued that the burden of proof is on the complainant to show that the money had been improperly applied elsewhere. This is not so. When the defendant in error had shown that the village collected the money applicable to the payment of his bonds and had not paid them, he had met the burden imposed upon him and was entitled to judgment unless the plaintiff in error showed a valid defense.” And in Norfolk & W. Ry. Co. v. Board of Education, 14 F. Supp. 475, which involved the warrants and liability in the case at bar, Judge Woodward said (p. 480):

“It appears from the above cases that it is not essential that the complainant show that the city of Chicago and board of education has misapplied the taxes collected. Whether defendants have paid other warrant holders more than their proper share is immaterial to plaintiff’s case. The gist of the plaintiff’s cause of action is that the defendants have receivecl taxes from the 1929 levy against which plaintiff’s warrants were issued and the defendants have not paid the plaintiff its pro rata share of such taxes actually received by defendants. This makes out a complete case warranting recovery in favor of the plaintiff and the burden is upon the defendants to show, if they can, a defense to such case.

“The court holds that the plaintiff is entitled to recover from the city of Chicago and the board of education its pro rata share of all moneys received by the defendants applicable to the payment of 1929 educational and building warrants as for money had and received to the use of plaintiff, and hence is entitled to an accounting.” Hence the liability of the Board is unaffected by what it did with the tax funds, the use to which the Board put the tax fund being immaterial in determining the liability to each unpaid warrant holder. Plaintiffs’ position that the liability of the Board to each unpaid warrant holder is to be reduced in an amount equal to the' sum recovered from the paid warrant holders is untenable. The liability of the Board to each warrant holder is a personal liability in which no other warrant holder has an interest. The recovery by one warrant holder does not affect the right of another warrant holder to sue the Board and recover a judgment for the full amount of his claim. The liability of the municipality to warrant holders is unlimited' and not affected by the measure of recovery in cases to which they are not a party. The stockholders cases cited by plaintiffs are not helpful. They are on an entirely different basis from the case at bar. The taxpayer cases also fall into a special classification. The rule requiring joinder of parties is relaxed in some cases in order to afford a remedy. We do not know of any case under the third classification of Story where it has been held that numerousness of parties alone is sufficient ground for prosecuting a class action. Respondents do not care to proceed on the theory advanced in count II of the complaint. Plaintiffs, and others who may wish to join them as actual parties, may proceed with their action in an endeavor to recover from the paid warrant holders. The position of respondents is that if and when plaintiffs or others move against them in an effort to “restore the trust fund” respondents will meet the situation then presented. The paid warrant holders are widely scattered throughout the United States and it is manifest that the expense of suing them, trying the cases where necessary, recovering judgments, and collecting the judgments, would be very great. Plaintiffs include in the class they seek to represent unpaid warrant holders who received payment of some warrants formerly held by them. It is obvious that in asserting a right to recover against such warrant holders (without bringing them into the action as actual parties) a portion of the payments received from the Board and to deduct from the amount due on unpaid warrants the excess received on paid warrants, plaintiffs in the consolidated cases are confronted with a conflict of interest. It is well established that in a class action the plaintiffs should not introduce any question of priority or any matter which may give rise to a contest or opposition between themselves and any of those whom they wish to represent. (Calvert on Parties in Equity, p. 38.) Under plaintiffs’ theory, at best, respondents’ right to recover will be postponed for an indefinite period. The effect of plaintiffs’ suit is to deprive respondents and other unpaid warrant holders of their liberty of action. The theory of plaintiffs’ consolidated cause is entirely at variance with the theories and rights of the other unpaid warrant holders. Here let us recall the language of the court in Hale v. Hale, 146 Ill. 227, 257:

“A familiar illustration may be found in cases where the parties are so numerous that it is inconvenient or impossible to bring them all before the court, and it appears that they all stand in the same situation, and have one common right or one common interest, the operation and protection of which will be for the common benefit of all, and can not be to the injury of any.” (Italics ours.) Viewing the facts disclosed by the record in this case, how can it be said that the prosecution of the consolidated causes to the exclusion of all other causes, will be for the common benefit of all and not to the injury of any? It appears clear under the authorities that unpaid warrant holders have a choice to proceed against the Board or to attempt to effect a partial recovery against paid warrant holders, and cannot be forced to proceed against their will to adopt either remedy to the exclusion of the other, or be forced to pursue a third remedy consisting of a combination of the others. We are not called upon in this appeal to pass on the proposition as to whether paid warrant holders can be required to account on a pro rata basis to those who have not been paid. The assumption is that the officers, attorneys and trustees of the Board are performing their duties as public servants. If someone should demand that the Board sue the “paid” warrant holders in order to recover the excess payments and the Board declined to act, it has been suggested that the question as to whether the Board could be compelled to sue could then be raised by a mandamus action.

Bearing in mind that the answers deny that the Board is insolvent, that the liability to warrant holders has been established, that the Board is not contesting any cases where liability is asserted, and that in the proposed class suit involved and.expensive litigation will be necessary, it becomes apparent that the remedy afforded in the consolidated causes is less efficacious than the remedy afforded to those who are unwilling to join therein. From the authorities we are satisfied that the facts in the instant case are not such as to warrant the bringing of a representative suit. The only basis for the injunction is to protect the asserted exclusive jurisdiction of the court on the theory that all warrant holders are before the court as members of the class represented by the individual plaintiffs. As the consolidated causes are not true class actions, it follows that the prosecution of other suits and the enforcement of other decrees may not be enjoined.

Respondents also advance the contention that plaintiffs and intervenors are guilty of laches because of unreasonable delay in applying for the injunction. Plaintiffs knew that the respondents’ eases were filed and that respondents were incurring expense in prosecuting such cases and knew that some of the cases had gone to decree. It appears that respondents paid attorneys’ fees and incurred other expenses, although the amounts are not specified. Under all the circumstances here disclosed we find that plaintiffs were guilty of laches in applying for the injunction and thereby respondents incurred expense, judgments were assigned, and warrants were stamped with a notation of judgment; all of which could have been avoided if plaintiffs had sought the injunction in due season.

In passing on the motion for an injunction in a case of this nature it was incumbent on the chancellor to carefully consider the equitable positions of the parties. Those who seek to represent the class hold and own less than one per cent of the warrants. That fact alone would not, of course, prevent them from maintaining a class action. However, considered in connection with all the other facts and circumstances in the case it is clear that plaintiffs could not become champions of the rights of all in the class. The briefs are voluminous and many other points are raised, all of which have been considered by the court. However, the views expressed on the points discussed dispose of the appeal and make it unnecessary to further extend this opinion.'

Therefore the order of the circuit court of Cook county entered June 21, 1938, granting a temporary injunction should be and it is reversed.

Order reversed.

John J. Sullivan and Friend, JJ., concur.


source: Caselaw Access Project

author: Mr. Justice Friend

license: Public Domain

text:
    Collateral Finance Company, Appellant, v. I. S. Braud, Trading as Braud Motor Sales, Appellee.
    Gen. No. 40,065.

      Opinion filed December 30, 1938.
    Rehearing denied January 13, 1939.
    Harold J. Green, of Chicago, for appellant.
    Goldman, Allshouse & Healy, of Chicago, for appellee ; Robert G. Dreffein and M. M. Loman, both of Chicago, of counsel.
   Mr. Justice Friend

delivered the opinion of the court.

In a garnishment proceeding instituted in the municipal court by plaintiff .against defendant, as garnishee, the latter answered “no funds.” Plaintiff contested the answer, which was subsequently set for hearing, and upon trial the court discharged the garnishee. Plaintiff appeals.

The uncontroverted evidence discloses that November 28, 1936, Meier Motors Company, Inc., executed a chattel mortgage on certain personal property to the Universal Dealers Company, which was not recorded until January 12, 1937. Subsequently, and prior to January 29, 1937, Universal Dealers Company took possession of the property for the purpose of foreclosing its mortgage, and on January 29 sold the property under the chattel mortgage sale to I. S. Brand, trading as Brand Motor Sales, garnishee herein, for $2,850. No question is raised as to the bona tides of these transactions. March 3, 1937, Collateral Finance Company, plaintiff herein, confessed judgment on three notes of Meier Motors, Inc., one for $2,000, executed December 17, 1936, and the other two notes for $291.30 and $200 respectively, dated January 13, 1937, all payable to bearer and each having a power of attorney to confess judgment.

As ground for reversal, plaintiff takes the position that the mortgage, under which the garnishee purchased the chattels described therein for $2,850 and upon which his rights are predicated, was fraudulent and void as to the creditors of the mortgagor, because it was not recorded within 10 days as provided by the Chattel Mortgage Act, as amended in 1931; that although Braud purchased the chattels at what he supposed was a valid mortgage sale, nevertheless by reason of the delayed recordation, the creditors’ rights to the chattels therein itemized or the proceeds thereof, are paramount to the rights of any other person claiming thereunder, including Braud; that even though the chattel mortgagee took possession of the chattels prior to the time that plaintiff instituted-suit, but long after the mortgage was executed, and after the statutory period for recordation had elapsed, the chattel mortgagee could not thereby defeat plaintiff’s claim once the plaintiff obtained judgment and commenced the instant proceeding; that the sale, and therefore Braud’s purchase, was wholly without authority, and amounted to a technical conversion of the goods; that the chattels were valued at $2,850, and therefore Braud is liable in garnishment to plaintiff up to the sum of $2,850 plus interest at the rate of 5 per cent per annum from January 29, 1937, the date of the sale.

Since the controversy arises over the construction of the Illinois Chattel Mortgage Act (ch. 95, Ill. Rev. Stat. #¡L937 [Jones Ill. Stats. Ann. 83.01 et seq.~\) a summary of the statutory law and the rights of parties thereunder will be helpful to an understanding of the issues involved. Section 1 of the statute reads as follows: “No mortgage, . . . 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 the instrument is acknowledged and recorded or filed as hereinafter directed; . . . ” Under this provision of the statute, if the mortgagor delivers the chattels to the mortgagee nothing further is required to make the mortgage valid as against third persons. However, if the mortgager retains possession of the chattels, then the mortgage must be acknowledged and recorded as provided in subsequent sections of the act.

Prior to 1931 section 4 of the statute made no provision as to the time within which recordation of a chattel mortgage was required. It read as follows: “Such mortgage . . . acknowledged as provided in this act shall be admitted to record by the recorder of the county in which the mortgagor shall reside at the time when the instrument is executed and recorded. . . .” Thus, a chattel mortgage could be recorded at any time after its execution and still be a valid lien as against the rights of third persons. Failure to record his mortgage imposed on the mortgagee only the risk that some third person might acquire a right or a lien upon the chattels prior to the time that the mortgagee asserted his lien. Under this section as originally enacted a chattel mortgage was a valid lien only from the time it was filed for record, even as against purchasers and creditors with actual notice. (Blatchford v. Boyden, 122 Ill. 657.) And since the only requirements for the validity of a mortgage as against third persons were a transfer of possession to the mortgagee, or a recordation ¿f the mortgage, the courts of this State held that the mortgagee could cure defects of an improperly recorded mortgage or one that was not recorded at all, by either taking possession of the chattels or by subsequently recording* a corrected instrument before any other right or lien intervened. (Springer v. Lipsis, 209 Ill. 261.) In that situation, if a creditor acquired a lien upon the chattels before the defective or unrecorded mortgage was cured, by reason of the mortgagee’s taking possession, the lien of the mortgage became subordinate and subject to the intervening rights of lien creditors. (Southern Surety Co. v. People’s State Bank of Astoria, 332 Ill. 362.)

It is pointed out by plaintiff’s counsel that this state of the law was obviously unfair to other than mortgage creditors, because general creditors who had extended credit to a debtor, relying on his possession of chattels against which there was no mortgage of record, often learned, before their debt had matured, that the holder of some unrecorded mortgage had cured the defect by taking possession of all the debtor’s chattels and foreclosing the mortgage, thus leaving no property out of which the general creditors could satisfy their claims, and it is argued that the legislature, in recognition of the unfairness of this situation and of the opportunities for fraud which were presented, by reason of the indeterminate period during* which a mortgagee under an unrecorded mortgage could maintain a secret lien, enacted an amendment to the chattel mortgage act in 1921, known as section 4A, which provided in substance that no mortgage should be valid against the creditors of the mortgagor, even though admitted to record as provided in section 4, unless it should be filed for record within 10 days of its execution, and that any such instrument not filed within the prescribed 10 days should be fraudulent and void as to creditors. The Supreme Court in Nelson v. Hoffman, 314 Ill. 616, held this amendment unconstitutional on the ground that it made reference to the title only, instead of being inserted at length in the new act. However, the court, in passing upon the validity of the amended section 4A, recognized the purpose of the amendment, and commented on it as follows: “The sole purpose of section 4A was to amend section 4 so that mortgages acknowledged and recorded should be good and valid from the time of filing for record against everybody except creditors of the mortgagor, but not good and valid against such creditors unless filed for record within ten days of their execution. ’ ’ The opinion in Nelson v. Hoffman was filed in the December term, 1924, and it was not until 1931 that the legislature again passed an amendment to the Chattel Mortgage Act, and in accordance with the ruling of the Supreme Court in the Nelson case, incorporated the new subject matter as an amendment to section 4, by changing the first sentence of that section and making section 4 read as follows: “No mortgage ... of personal property . . . hereafter executed shall be valid as against the creditors of the mortgagor, even though admitted to record, as hereinafter provided, unless it shall be deposited for filing or recording . . . within ten days of its execution, and any such mortgage . . . not deposited for filing or recording within ten days of the execution thereof shall be fraudulent and void as to such creditors.”

The legislature thus created a new condition precedent for the validity of a chattel mortgage against the creditors of the mortgagor, namely, the filing of the mortgage within 10 days of its execution. Under the present statute, as amended in 1931, section 1 of the act refers to the rights of third persons, while section 4 refers to the validity of mortgages on personal property, as against the creditors of the mortgagor, and seemingly creates new rights for a limited class of persons, namely, creditors. In the light of the history of the chattel mortgage legislation in this State, the amendment of section 4 in 1931 was obviously enacted to protect general creditors from the indeterminate secret lien of an unrecorded chattel mortgage, and limited the time during which such lien might remain secret to 10 days after the mortgage was executed.

The garnishee contends, however, that the words, “creditors of the mortgagor” are limited to lien creditors, and that a mortgagee under a defectively recorded or executed mortgage, by taking possession of the personal property before any lien intervenes, perfects his title to the property as against everybody. It is urged that our courts have continuously and consistently held that if a mortgagee under a defectively recorded instrument takes possession of the property before any lien intervenes, he thereby perfects his title to the chattels against the whole world, except those creditors who had a lien of the property before possession was taken, and a number of early cases are cited construing* the meaning of the words, “third persons,” as used in the statute. (Allcock v. Loy, 100 Ill. App. 573; Sumner v. McKee, 89 Ill. 127; Central Trust Co. v. Sheridan Beach Hotel Bldg. Corp., 259 Ill. App. 404; Springer v. Lipsis, 209 Ill. 261; First Nat. Bank v. Barse Live Stock Commission Co., 198 Ill. 232; Chipron v. Feikert, 68 Ill. 284; and Southern Surety Co. v. People’s State Bank, 332 Ill. 362.) This contention of the garnishee and the foregoing cases cited in support thereof ivas applicable to the situation that existed before the statute was amended in 1931, but it does not take into consideration the new subject matter added to section 4 nor answer the question whether the legislature intended by the amendment to protect general creditors from the indeterminate secret lien of an unrecorded chattel mortgage an cl the resulting consequences that follow from a failure to file the mortgage or to take immediate possession of the mortgaged chattels.

In the case at bar the mortgage was not recorded within the 10-day period prescribed by the statute, and therefore as to the creditors of the mortgagor it was as though it had never been recorded. The garnishee argues that under these circumstances the mortgagee took possession of the property and was thereby protected, except as against intervening lien claimants; that since plaintiff in this case did not have a lien on the property prior to the time that the mortgagee took possession, he was merely a general creditor and that section 4, as amended, was not intended to apply to general creditors of the mortgagor but only to judgment creditors or those having a valid lien on the property.

We find no decision in this State construing the meaning and effect of the words, “creditors of the mortgagor,” as used in the amendment of section 4, but various States, including New York, Michigan, Missouri, New Jersey, California and Florida, having similar statutes, have construed language of like import and under similar circumstances. In most of these States the statute fixed no time within which the chattel mortgage had to he recorded, but the courts have uniformly construed the respective statutes to mean that the mortgage, in order to preserve its validity as against the creditors of the mortgagor, has to be recorded with prompt dispatch, and have held that unless the mortgagee takes possession or records his mortgage immediately, or within a reasonable time, his rights are postponed to those of all creditors, whether they became such before or after the mortgage was recorded or possession taken by the mortgagee. Thus, under sections 230 and 235 of the lien law, a statute similar to ours, the court, in Shay’s Estate, 157 N. Y. Misc. 615, 285 N. Y. S. 379, decided in 1935, defined the word “creditor” as follows (pp. 381-383): “The term ‘creditors,’ as used in the sections quoted, includes all persons who were such while the chattels remained in possession of the mortgagor. ... A simple contract creditor is as much within the protection of the statute as a creditor whose debt has been merged in a judgment. ... It will be noted that . . . [the statute says] the mortgage . . . shall be invalid as against the creditors of the mortgagor, not merely as against judgment creditors having executions. . . . The rule that a creditor must first recover a judgment is simply one of procedure and does not affect the right.” (Italics ours.)

In Ransom & Randolph Co. v. Moore, 272 Mich. 31, the court, in construing the Michigan Chattel Mortgage Act, defined “creditors” as used in that statute in the following language (pp. 36-37): “The recording statute . . . was enacted for the purpose of protecting bona fide innocent creditors against the danger of being misled into extending credit to a debtor with a secret lien on his property. The statute assures the complete protection of such creditors by declaring an unfiled chattel mortgage to be absolutely void as against them, unless accompanied by immediate delivery and followed by an actual and continued change of possession of the things mortgaged. We therefore hold, following the tendency of our former decisions as above noted, that a mortgagee under an unrecorded chattel mortgage cannot, by subsequently taking possession of the property under and by virtue of his mortgage, acquire any right as against an interim creditor, who extended credit to the mortgagor between the date of execution of the mortgage and the taking of possession by the mortgagee. . . '. ” (Italics ours.) In its opinion the court quoted from the earlier decision in Dempsey v. Pforzheimer, 86 Mich. 652, as follows: “The gist of the reason is that the creditor has no business with the debtor’s property until he has obtained possession of it by some legal process that gives him a lien upon it. This is not because of any right that the mortgagor, who has kept his mortgage from record, has against the other creditors, but because such creditors have no right to touch the debtor’s property without his consent, without legal process.”

In In re Bothe, 173 Fed. 597, the court had occasion to consider the recording provisions of the Missouri Chattel Mortgage Act, and in discussing the question here-involved made the following observation, quoting from First Nat. Bank v. Connett, 142 Fed. 33: 11 Such a mortgage is also utterly void as to simple contract creditors who extended credit after it was given, and who have secured no title or lien by purchase, execution, attachment or otherwise. As to them the subsequent recording of the instrument is of no effect. It cannot be asserted against the enforcement of their demands. ’ ’

In Roe v. Meding, 53 N. J. Eq. 350, the court in construing section 4 of the Chattel Mortgage Act of New Jersey held that unless the mortgagee takes possession or records his mortgage immediately his rights are postponed to those of all creditors, whether they became such before or after the mortgage was recorded or possession taken by the mortgagee.

A similar conclusion was reached by the Supreme Court of California in Ruggles v. Cannedy, 127 Cal. 290, 53 Pac. 911 and Chelhar v. Acme Garage, 61 P. (2d) 1232, wherein the court gave effect to section 2957 of the California Civil Code, regulating chattel mortgages, which provides in substance that a mortgage of personal property is void as against creditors of the mortgagor and subsequent purchasers and incum-. branees of the property in good faith and for value,' unless recorded.

The Florida Chattel Mortgage Act contains a provision that no mortgage of personal property shall be valid as against creditors or subsequent incumbrancers of the mortgagor, unless it be recorded or unless the mortgagee takes immediate possession of the property. In Spellman v. Beeman, 70 Fla. 575, 70 So. 589, Spellman failed to record a mortgage which was executed May 14, 1913, until June 5, 1914. Beeman obtained a mortgage on the same chattels from the same mortgagor on July 7, 1913, which was improperly recorded. Spellman took possession of the chattels, and Beeman thereupon filed a bill to foreclose, and in discussing the respective rights of the parties under the chattel mortgage statute of Florida, the court said: 11 The Spellman mortgage, being void as to Beeman, continued to be void as to him, and the subsequent taking of possession by Agnes R. Spellman of the mortgaged property or the record of her mortgage after Beeman had, for a valuable consideration and without notice of her mortgage, acquired his, would not restore the validity of her mortgage as against him. ’ ’

In Landis v. McDonald, 88 Mo. App. 335, a mortgage on chattels was not recorded. Landis extended credit to the mortgagor and was a general creditor, but before he obtained a judgment the mortgagee took possession of the chattels. The controversy between the parties as to their respective rights grew out of the Missouri statute, which is similar to the provisions of the Illinois Chattel Mortgage Act, and the court, in an exhaustive opinion, said the reason for the rule that a mortgagee cannot defeat the rights of a creditor by taking possession of the chattels under an improperly recorded mortgage before the creditor had obtained a judgment or made his claim a lien on the mortgaged chattels, saying (p. 340): “But it is said that the creditors in this case being general creditors, or creditors at large, they cannot invoke the aid or protection of the statute; and that if they could, they have not shown that they were harmed, or that they were deceived by the concealment of the mortgage. We are, however, of the opinion that the statute applies to and protects a general creditor, or, as he is sometimes called, a creditor at large. "While it is necessary that the creditor must be prepared to lay hold of the property in specie (such for instance, as by attachment, or execution under a judgment) when he comes to enforce his right; yet, that right may accrue to him as a mere general creditor. In discussing the subject, the court of appeals in New York said: ‘It is true, the mortgage cannot be legally questioned until the creditor clothes himself with a judgment and execution, or with some legal process against his property; for creditors cannot interfere with the property of their debtor without process. But when they present themselves with their process they may, I think, go back to the origin of their debt, and show, if they can, that when it was contracted, the incumbrance with which they are now confronted existed and was kept secret, by being withheld from the proper officer.’ . . . The statute does not malee it a condition to its protection that the creditor must be a specific creditor with process for seizure of the property in his hands. ‘The fact that the creditor cannot assail the mortgage until he has seized the property is of no moment in determining whether he belongs to the class of persons as to whom the mortgage is void.’ (Bank v. Oium, 3 North Dak. 193, 200; Feary v. Cummings, 41 Mich. 383.) If he belongs to the statutory class, he may then prepare, or qualify himself to assert his right by the proper procedure, and when thus prepared with process he may enforce the right which accrued to him as a creditor at large.

“. . . It is of no avail to defendant (mortgagee) that he took possession of the goods. The fraud had already been committed and the injury already done ; ‘taking possession will not nullify or neutralize an actual fraud.’ ”

In the case at bar the mortgagee delayed the filing of its mortgage for more than a month beyond the 10-day period provided by statute, and under the provisions of the Illinois Chattel Mortgage Act and decisions in substantially all states which have construed statutes similar, this rendered the mortgage fraudulent and void as to the creditors of the mortgagor; and although Brand purchased the chattels at what he supposed was a valid mortgage sale, he should not be permitted to retain possession of the proceeds of the chattels sold to the exclusion of the creditors of the mortgagor. The cases relied upon by the garnishee were all decided prior to the amendment of the act in 1931, and we think they are not helpful in construing the present statute, because, obviously, the legislature, by amending the act, sought to eliminate the unfairness and inequity made possible by the maintenance of a secret lien under the statute before its amendment. Secret liens are not favored in our law, and the whole trend of legislation has been to protect persons having valid rights against those who, from design or negligence, have failed to record their papers when required to do so by statute. (Wardlaw v. Troy Oil Mill, 74 S. C. 368, 54 S. E. 658.)

During the pendency of this appeal the garnishee moved to dismiss the appeal, and that motion was reserved to the hearing. It is first urged in support of the motion that since Collateral Finance Company is a partnership, there is no proper plaintiff to the judgment on which the garnishment proceedings are predicated. Meier Motors, Inc., the original defendant, waived the fact that the suit was instituted against it by plaintiff in the plaintiff’s firm name, and since Meier Motors, Inc., itself could not now raise this question, because it permitted the case to go to trial and judgment on its merits, the garnishee, whose rights are limited to those of the original defendant, should not be permitted to raise the objection at this time. (20 Ruling Case Law, p. 921, par. 133.) It has been held that a judgment in favor of or against a firm, in the firm name, is not void but is merely irregular, and such a judgment is not subject to collateral attack, where the defendants were personally served, appeared, and did not in any manner question the form in which the plaintiff’s suit was brought. (29 L. R. A. (N. S.) 284; Ives v. Muhlenburg, 135 Ill. App. 517.) Moreover, the rule authorizing a partnership to sue or be sued in the partnership name is not one of substantive law, but rather a matter of practice to be defined by the local authority, which the judges of the municipal court of Chicago are authorized to regulate by rules. (Fleischman v. Walker, 91 Ill. 318.)

The other ground urged for dismissal of the appeal is that the report of proceedings was filed before, and not after, the notice of appeal was served. We believe, as was said in People ex rel. Wilmette State Bank v. Village of Wilmette, 294 Ill. App. 362, that the Civil Practice Act was adopted to facilitate an orderly disposition of business of the courts and to expedite the prompt administration of justice; that the purpose of the act was to simplify the procedure to enable the parties to a cause to have the merits of their controversies passed upon by the courts; and that to this end the act should be liberally construed. The fact that the report of proceedings was approved and filed before the notice of appeal was served is not contrary to the language or spirit of the act.

In view of our conclusions, the judgment of the municipal court, discharging the garnishee, is reversed and the cause is remanded with directions that judgment be entered against I. S. Brand, trading as Brand Motors Sales, the garnishee, for the amount of $2,777, plus interest at the rate of 5 per cent per annum from the date of its rendition, and costs.

Judgment reversed and cause remanded with directions.

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