text:
    Minot Silliman, Appellee, v. Milo R. Nowlan, Appellant.
    Gen. No. 8,655.

      Opinion filed September 20, 1933.
    Brian & McManus, for appellant; Robert J. Hartley, of counsel.
    W. W. Wright and George W. Hunt, for appellee.
   Mr. Justice Dove

delivered the opinion of the court.

This is a suit in assumpsit, instituted by appellee to recover upon three promissory notes. The declaration alleges that each of said notes was payable to the order of Trumans ’ Pioneer Stud Farm, and was made and delivered by appellant to the payee on March 30, 1929; that said notes matured on September 1, 1929, September 1, 1930, and September 1, 1931, respectively, and each note bore interest at the rate of six per cent per annum from date until paid; that the payee, after the execution of said notes, but on the same day and year, indorsed each of said notes and delivered the same to appellee, who, prior to the maturity of any of the notes, indorsed and delivered them to the State Bank of Toulon. The declaration then alleges that each of said notes was a judgment note and that on November 18, 1929, the State Bank of Toulon obtained judgment thereon by confession against appellant for the sum of $136.44, which judgment was never paid by appellant, but was collected from appellee by reason of his liability as indorser. Attached to the declaration were copies of the notes and an affidavit of appellee stating that he had read the declaration, knew the contents thereof and that the matters and things therein contained are true and correct; that as indorsee of said notes, he paid to the State Bank of Toulon the sum of $133.20 to satisfy the judgment which the bank had obtained against appellant, and that by reason of said payment, appellant is indebted to appellee for said sum.

To this declaration appellant filed the general issue, duly verified by his affidavit and gave written notice that upon the trial of the cause he would offer in evidence and insist first: that-the consideration for the notes upon which the judgment had been taken had failed, of which failure appellee had knowledge long prior to the time when he voluntarily paid the judgment to the bank. That said judgment had been opened up and the suit was pending for hearing in the circuit court of Stark county at the time appellee paid said judgment. Second, that said judgment was taken upon notes which were wholly without consideration and upon which nothing was due from appellant, of which appellee had knowledge long prior to the time appellee voluntarily paid said judgment. Third, that the judgment was taken upon notes, which were illegal and void, having been given for the purchase price of a Breeding Certificate issued by the Truman Pioneer Stud Farm; that the sale of said certificate was forbidden by the Illinois Security Act, inasmuch as it was a Class “D” security, and appellee was a party, to the transaction, had complete knowledge of the contract with appellant, was present at the time of the transaction and his payment to the bank was a voluntary payment by him of a void judgment. Fourth,, that each of the notes upon which judgment was taken had been materially altered without the knowledge or consent of appellant, by inserting the word ‘ ‘ six ’ ’ therein, thereby making each of them bear interest at the rate of six per cent, whereas at the time they were executed each note bore no interest. Fifth, that appellee knew that the horse to be furnished appellant was represented to be a low, wide out, blocky horse and a 50 per cent foal getter, but the horse tendered appellant was the opposite; that during all the negotiations and transactions which appellant had relative to said notes, upon which judgment was taken, appellee knew all the facts alleged in this notice, was present and a party in interest, and entered into the deal wherein appellant signed the notes and profited in the transaction.

Issue being joined upon the verified plea of the general issue, the cause was submitted to a jury and at the close of the evidence, in obedience to a peremptory instruction, the jury returned a verdict in favor of the appellee and against the appellant for $148.31, upon which judgment was rendered and the record is brought to this court for review by appeal.

The evidence introduced on behalf of appellee, the plaintiff below, discloses that Trumans’ Pioneer Stud Farm is a corporation, managed by J. G-. Truman, and that T. J. Malloy was its representative; that Mr. Malloy had visited appellant on several occasions endeavoring to interest him in the purchase of a stallion; that appellee, accompanied by Mr. Malloy, were in appellee’s car and appellant executed these notes in their presence. The notes were the regular printed form judgment notes used by the Truman Company and as printed bore interest at the rate of seven per cent per annum from date until paid, but Mr. Malloy testified that the night before appellant signed these notes he, Malloy, wrote the word “six” above the word “seven,” which he had scratched out by drawing a pen line through it so that the note when executed bore six per cent interest, and was in the same condition as it appeared when offered in evidence at the trial.

J. G. Truman testified that he was secretary, treasurer and general manager of Trumans’ Pioneer Stud Farm, and as such, indorsed the notes executed by appellant on April 15, 1929, and delivered them to appellee as part payment of a horse which he had purchased of appellee on February 25, 1929, for $500, but which was not delivered until a day or so after April 15, 1929, the arrangement being that appellee was to accept notes of parties in his neighborhood to that amount, which Truman obtained from the sale of a stallion which was delivered to the parties the evening of April 15, 1929.

Appellee corroborated the evidence of Mr. Truman as to his receipt of the notes in part payment of a horse which he sold to the Truman Pioneer Stud Farm and further testified that after he retained the notes for a month or so, he indorsed and disposed of them to the State Bank of Toulon, receiving credit therefor upon his account at that bank; that on December 24, 1930, he paid the bank $133 in compliance with its request, inasmuch as he had indorsed them. He further testified that he knew the notes he received in payment for his horse were notes executed by the parties who had purchased shares in the stallion; that he himself had purchased a share and went with Mr. Malloy to appellant’s home, at which time appellant asked him about the stallion and he told him he thought it was a good thing; that he also went with Mr. Malloy, who was the agent for the Trumans to other places and heard him dealing with them, “knew the dealings, knew his purpose and knew all about it.”-

It was stipulated that the State Bank of Toulon recovered a judgment by confession upon these notes on November 18, 1929, for the sum of $136.44. On November 23, 1929, this judgment was opened up and leave granted appellant to plead and pleas were filed, but the judgment was released of record on December 24, 1930, by the bank. The three notes were offered and over the objection of appellant admitted in evidence.

In his own behalf appellant testified that appellee and Mr. Malloy were sitting in appellee’s car at the Carstairs’ place between 9 and 10:30 a. m. the day the notes were executed, and that he, appellant, was standing beside the car with one foot on the running board when he signed these notes which represented two shares in the stallion which was being purchased, and that both of them talked about the horse. His counsel then asked him to “tell the jury what conversation took place at that time between you and Mr. Malloy prior to your signing the notes, what did he say about the horse.” This was objected to, but the objection was overruled and appellant answered that Malloy told him he was a lucky bird for having so many mares to breed to such an extraordinarily good horse. He said it was an imported stallion and international prize winner. He said it was a low down, blocky, wide wagon kind of horse and said he sold several shares in the horse. Appellant testified that he told Malloy that he would not sign the notes because he didn’t want the notes scattered around the country; that he did all his business at one bank and didn’t want the notes sold, to which Malloy replied that Mr. Truman never sold any of his notes — always held them. Appellant then said he wouldn’t sign the notes until he, Malloy, gave him his word of honor the notes wouldn’t be sold, and Malloy said they would not be sold. Appellee, according to appellant’s testimony, said very little while there, but did say something about the horse, and asked if any others around there would be interested, and appellant gave him Roy Lindstrom’s name. Appellant further testified that he signed the notes, but that when he signed them the word “seven” was scratched out and nothing written above it, and Malloy told him there was to be no interest upon them, but the next time he saw them was after they had been placed in judgment and at that'time the word “six” had been written in. That the stallion that was delivered was a gray stallion, with a rough head, very leggy, long bodied and his rear quarters didn’t conform to his front quarters.

Upon the motion of the appellee, all of this testimony following the question “What did he say about the horse?” was stricken from the record and excluded from the consideration of the jury, and the offer of appellant to prove the same facts "by four other witnesses was denied, and a verdict was returned in obedience to the court’s peremptory instruction.

It was the contention of appellee in the trial court and is his contention here that the evidence discloses him to be a bona fide holder of these notes for value in due course; that he had filed an affidavit of claim in pursuance of the statute, which was sufficient to require appellant to file an affidavit of merits, and while his verified plea did present a meritorious defense, it was not a sufficient affidavit of merits as would warrant the admission of the evidence which the court excluded and that the testimony excluded was inadmissible under the verified plea of the general issue.

Appellant contends that the affidavit filed by appellee with his declaration is not an affidavit of claim as required by the statute and therefore appellant was not required to file an affidavit of merits; that appellee, having joined issue upon the general issue, properly verified and gone to trial upon the issues raised thereby without an affidavit of merits as required by the statute, waived the filing of such an affidavit; that while it is true that his verified plea presented a meritorious defense, it was not an affidavit of merits as contemplated by the statute and was not so intended by appellant; that some of the evidence which the court excluded was admissible under the issues joined, and all of it was competent under the written notice of special defenses.

Section 55 of the Practice Act, Cahill’s St. ch. 110, 55, provides that if the plaintiff in certain actions shall file with his declaration an affidavit showing the nature of his demand and the amount due him from the defendant, after allowing to the defendant all his just credits, deductions and set-offs, if any, he shall be entitled to judgment, as in case of default, unless the defendant, or his agent or attorney shall file with his plea an affidavit stating that he verily believes the defendant has a good defense to said suit upon the merits to the whole or a portion of plaintiff’s demand, and specifying the nature of such defense.

The only purpose subserved by the affidavit of the plaintiff is to entitle him to judgment, as in case of default, unless the defendant shall file an affidavit of merits with his pleas and whether the plaintiff shall file such an affidavit with his declaration is entirely optional with himself. If he does not do so or files an insufficient one, the only effect of such failure is that the defendant is then entitled to plead to the declaration without accompanying his plea with an affidavit of merits. Kern v. Strasberger, 71 Ill. 303.

The affidavit of appellee, accompanying the declaration in this case, is as follows, viz.:

“Minott Silliman, being first duly sworn on oath, states that he is the plaintiff in the above entitled cause, and the endorsee of the notes respectively described in the declaration; that he has read the foregoing declaration and knows the contents thereof, and that the matters and things therein contained are true and correct; that as endorsee of the notes described in said declaration he paid to the State Bank of Toulon, Illinois, the sum of One Hundred and thirty three & 20/100 Dollars ($133.20) to satisfy the judgment which the said State Bank of Toulon, Illinois had against Milo R. Nowlan, the maker of the notes described in said declaration; that by reason of said payment the said Milo R. Nowlan is indebted to this plaintiff in the sum aforesaid.

Minott Silliman.

“Subscribed and sworn to before me this 6 day of October, A. D. 1932.

(Official Seal) D. K. Shearer, Clerk County Court.”

Under the statute it was necessary for the affidavit to . state the nature of appellee’s demand and the amount due him from appellant after allowing to the appellant all his just credits, deductions and set-offs. In the instant case the affidavit states that affiant was the plaintiff, the indorsee of the notes described in the declaration, and that the matters and things therein contained are true and correct; that as indorsee he paid the bank $133.20 to satisfy the judgment which the bank had against appellant, and concludes that by reason of said payment, appellant is indebted to him in this sum. The affidavit was insufficient to require appellant to file with his pleas an affidavit of merits, because it does not state the amount due after allowing to the defendant all his just credits, deductions and set-offs. Appellee insists, however, that even if his affidavit is not in full compliance with the statute, still the attention of the trial court was not called thereto, and no opportunity was given appellee to amend and therefore appellant waived his 'right to insist upon the insufficiency of his affidavit in this court and therefore can take no advantage thereof here, citing McKenzie v. Penfield, 87 Ill. 38. In the McKenzie case the phrase “all his just credits, deductions and set offs” was omitted from the affidavit of claim, but the affidavit of the plaintiff did state that the ‘ ‘ defendants are truly and justly indebted to him, after allowing all claims and set-offs whatever, in the sum of $140.40, said indebtedness being in the nature of one promissory note, given October 20, 1874, and due May 15, 1875, with ten per cent interest.” It appears in that case that the -defendants had filed a plea of non assumpsit, but no affidavit of merits, and upon the motion of the plaintiff, the court entered a rule upon the defendants to file such an affidavit, but defendants declined and for a failure to comply with that rule and for want of an affidavit, their unverified plea of non assumpsit was stricken from the files, a default entered and judgment rendered in favor of the plaintiff. The court, in affirming the judgment, said that the affidavit of claim was not a full and strict compliance with the statute, but the attention of the trial court was not' called to such defects and that parties would not be permitted to raise in the Supreme Court, for the first time, questions which were not submitted to the circuit court where the subject matter is such that the defect might have been supplied by amendment, if specially challenged.

The instant case is clearly distinguishable from the McKenzie case. Here appellant did not purport to file any affidavit of merits as provided by the Practice Act, and no suggestion was made to the court by appellee before the trial that appellant should file one. In the instant case, appellee took issue on the plea of the general issue and went to trial upon the issues raised thereby and not having insisted before the trial upon appellant filing a statutory affidavit of merits indicates to us that he did not consider his affidavit which he filed with his declaration as one which would require appellant to file a statutory affidavit of merits.

Appellee insists, however, that the verified plea of non assumpsit filed by appellant was equivalent to a statutory affidavit of merits and presented a meritorious defense, citing Fergus v. Cleveland Paper Co., 3 Ill. App. 629; Kimbark v. Blundin, 6 Ill. App. 539; Bauer v. White, 213 Ill. App. 159, and Willard v. Bristol, 251 Ill. App. 234. The Fergus case was a suit in assumpsit to recover against five persons as partners and the declaration was accompanied with an affidavit of claim as provided by the statute. Each defendant filed a plea of non assumpsit and a special plea verified by affidavit denying his joint liability. The trial court allowed a motion to strike these pleas from the files. The Appellate Court in holding this ruling erroneous called attention to the provisions of the statute and said “The language of the affidavits is manifestly different from that employed by the statute, yet we think the facts stated are broader, and more than an equivalent to those required by the statute. The pleas denying joint liability, if true, are a defense to the entire suit, and the affidavits verifying the pleas, state in substance . . . that they have such defense to the entire suit. The statute does not require the nature of the defense to be set out in the affidavit. These sworn pleas, however, not only show the existence of a defense, but indicate its precise nature.” In the Kimbark case, which was a suit upon an appeal bond, the defendant filed a plea of non est factum in proper form duly verified. In holding that the trial court erred in striking this plea from the files and entering a default for want of an affidavit of merits, the court said “The plea of non est factum set up a good defense to the action upon the merits, and an affidavit of the truth of that plea was a sufficient affidavit of merits within the meaning of the statute providing for such affidavits. . . . The affidavit of the truth of the plea was a substantial compliance with the statute as to an affidavit of merits.” In Bauer v. White, 213 Ill. App. 159, the court cited the Fergus and Kimbark cases, supra, and held that it was improper to enter a default without first striking the pleas from the files. Willard v. Bristol, 251 Ill. App. 234, was a suit in assumpsit brought by plaintiffs as indorsees and holders in due course of a note against Bristol and Smith as partners. With the declaration an affidavit of claim was filed and the defendants filed their pleas of the general issue, a special plea of payment and a special plea that Bristol was not a member of the partnership. Smith later filed an additional plea denying that he executed the note sued on. Replications were filed and a trial had which resulted in an instructed verdict for the plaintiff. The court in its opinion said that the pleadings of defendants presented no issue for trial, and the verification of the plea did not dispense with the necessity of an affidavit of merits under section 55 of the Practice Act, Cahill’s St. ch. 110, If 55. It does not appear from a reading of the opinion in this case which plea, if any, was verified. In our opinion the exact question before us was not presented in any of these cases and the Fergus and Kimbark cases were decided prior to the time that the statute required the affidavit of merits to specify the nature of such defense. In Truesdell v. Hunter, 28 Ill. App. 292, which was an action in assumpsit to recover upon a note, the plaintiff filed with his declaration an affidavit of claim. The defendant filed the general issue sworn to and two special pleas, one of which was sworn to and which denied the execution of the note. At the conclusion of its opinion the court said the defendant had no right to file pleas without an affidavit of merits on his part. The affidavit attached to the general issue putting in issue the signature of the note was not such an affidavit of merits as the statute requires, and the court should have allowed appellant’s motion to strike these pleas from the files. In Original Typewriter Circular Co. v. Buehler, 67 Ill. App. 575, which was a suit in assumpsit upon a note, the plaintiff filed an affidavit of claim as provided by the statute and the defendant a verified special plea without an affidavit of merits. The trial court struck the plea from the files because no affidavit of merits was filed, the plea only being sworn to, and rendered judgment for the plaintiff and this action was sustained by the Appellate Court and the judgment was affirmed.

In Bannat v. Zulley, 243 Ill. App. 497, which was an action in assumpsit "to recover the amount due on a check, the plaintiff filed with his declaration an affidavit of claim. To this declaration defendant filed a plea which he designated as a plea to the jurisdiction, but which the Appellate Court held was a plea in bar. This plea was verified by an affidavit in which defendant stated that he knew the contents thereof and that the same were true. Thereafter the court struck said affidavit and plea from the files on the ground that no affidavit of merits was filed by the defendant, and in affirming the action of the trial court, the court said, “Appellee having filed an affidavit of merits with his declaration, it was necessary that an affidavit of merits be filed with appellant’s plea, and in default thereof, the court was warranted in striking the affidavit to the plea, which did not purport to be an affidavit of merits, and the plea, from the files.”

In Colfax Grain Co. v. Bradford, 225 Ill. App. 419, it was held that at any time before the commencement of the trial, plaintiff had a right to have an insufficient affidavit of defense filed with the general issue stricken from the files.

Under the statute it is the duty of the defendant in his affidavit of merits to specify the nature of his defense and this means that he must set out the facts which constitute his defense. In the instant case the verification of the general issue cannot be held to be an affidavit of merits as provided by the statute and from the conduct of the parties prior to and at the trial, neither the affidavit accompanying the declaration or the affidavit verifying the plea of the general issue were treated as a statutory affidavit of claim or a statutory affidavit of merits. If appellee now desires to insist, however, that this was a statutory affidavit of merits, he must be held to have waived its insufficiency inasmuch as he joined in the issues tendered by appellant’s plea of the general issue, offered evidence to establish his case as completely as though a sufficient affidavit of merits was on file, proved not only the execution of the notes, but offered evidence to the effect that there had been no alteration of the notes since their execution and that appellee was a bona fide holder thereof for value. Appellee must therefore be held to have waived any insufficiency of this affidavit because he treated it as sufficient until after he had rested his case, and then for the first time insisted that the pleadings were in such condition as to preclude appellant from rebutting the' evidence which he had produced to prove the issues as he conceived them to be under the pleadings.

Treating therefore the affidavit of claim as being sufficient to require appellant to file an affidavit of merits, and treating the verification of the plea of the general issue as such affidavit of merits as required by the statute, we are of the opinion that appellee by his conduct at and before the trial waived the right to insist that such affidavit of merits was insufficient so as to preclude appellant from offering and having admitted the testimony which the court excluded upon his motion. Reddig v. Looney, 208 Ill. App. 413. Where the plaintiff takes issue on the plea and goes to trial without any affidavit of merits, the filing of an affidavit is considered waived. Chalkowski v. Szafranski, 250 Ill. App. 359.

Section 123 of the Negotiable Instruments Act of this State, Cahill’s St. ch. 98, if 145, provides that where a negotiable instrument is materially altered by the holder without the assent of all the parties liable thereon, it is avoided except as against a party who has himself made, authorized or assented to the alteration and subsequent indorsers. But when an instrument has been materially altered and is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original tenor. The next section provides that any alteration which changes the sum payable, either for principal or interest or any change or addition which alters the effect of the instrument in any respect, is a material alteration, and it has been held that changing a note from one that is non-interest bearing to an interest bearing obligation is a material alteration, Conkling v. Olmstead, 63 Ill. App. 649, and it has been held that a note is materially altered when the interest rate has been raised. Brooks v. Laws, 202 Ill. App. 448. The question of alteration is not raised under the general issue with written notice of special matters of defense, Dewey v. Warriner, 71 Ill. 198, nor will the burden of proving the execution of the notes sued on be cast upon the plaintiff where an unverified plea of non assumpsit is filed even though it is accompanied by a verified written notice to the effect that defendants would deny the execution of the notes sued on. Bailey v. Valley Nat. Bank, 127 Ill. 332. In Lowman v. Aubery, 72 Ill. 619, which was an action of assumpsit on a promissory note, a plea of non assumpsit and a plea of non est factum, sworn to were filed. The question was whether the note had been altered after its execution, from $500 to $600, and it was insisted that it was necessary for the plaintiffs to have proved that there was no alteration of the note before it was entitled to be admitted in evidence. In disposing of this contention, the court said, “When the signature was admitted and the note offered, and, on inspection, there was no appearance of alteration to be discovered, the court could not do otherwise than admit it in evidence, leaving defendant to prove an alteration. ’ ’

In the instant case the declaration alleged the execution of these notes and averred that by their terms appellant promised to pay a definite sum at a definite time, with interest thereon at the rate of six per cent per annum from date until paid. Appellant denies that he so promised and put these allegations in issue by filing his plea of non assumpsit. Whether a note has been altered in a material particular can only be raised by a verified plea. Lowman v. Aubery, supra. Appellant verified his plea of the general issue and issue was joined upon that plea. By so doing, appellee, upon the trial, was required to prove the execution of the notes sued on and every material allegation of the declaration. McPherson v. Board of Education, 235 Ill. App. 426; Nokomis Nat. Bank v. Hendricks, 205 Ill. App. 54. Upon'the trial, appellee proved the genuineness of appellant’s signatures upon the notes and no alteration being apparent upon their face, they were properly admitted in evidence. To overcome this prima facie case, appellant, in order to maintain his plea, testified under oath that appellee was present when he placed his name upon these notes, that the payee assured him in the presence of appellee that there was to be no interest upon the notes and that he then signed them and at that time the word “seven” was scratched out and nothing written above it, the word “six” not being written in the notes at the time appellant executed them. Whether an alteration is material or not is a question of law for the court. Milliken v. Marlin, 66 Ill. 13. This evidence tended to prove that the notes had been materially altered since their execution and delivery, and inasmuch as the question of whether or not there had been a material alteration is a question of fact, appellant, under the pleadings, was entitled to have the issues submitted to a jury for determination. Catlin Coal Co. v. Lloyd, 180 Ill. 398.

But it is insisted by appellee that he is a bona fide holder for value, and even though there was a material alteration, the notes are not invalidated in his hands. Section 59 of the Negotiable Instruments Law, Cahill’s St. ch. 98, if 79, provides that every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some other person under whom he claims acquired the title as a holder in due course. If the evidence of appellant is true to the effect that these notes,' when executed by him, bore no interest and appellee knew that fact and subsequently received them for value, knowing they had been materially altered since their execution, he cannot be said to be a holder in due course. Negotiable Instruments Law, sec. 52, Cahill’s St. ch. 98, if 72. Furthermore, under the provisions of section 55 of the same act, Cahill’s St. ch. 98, If 75, if the testimony of appellant is true, when he told the representative of the payee, in the presence of appellee, that he would not sign these notes until he was assured they would not be sold, and the agent of the payee told him that the payee never sold its notes and that these notes would not be sold, the payee’s title was defective when it negotiated these notes to appellee and the payee was guilty of a breach of faith when it did so, and appellee being a party thereto cannot be considered a holder in due course.

Appellant insists that inasmuch as the State Bank of Toulon had obtained judgment upon these notes and subsequently released that judgment of record, appellee was precluded from maintaining this suit. It is true that as between the parties to that suit, appellant here and the State Bank of Toulon, the notes were merged in the judgment obtained thereon, but appellee’s liability to the bank was upon his contract as an indorser, and he having paid the bank had a perfect right to maintain this suit against the maker. So far as appellee was concerned the notes were not merged in the judgment obtained by the bank, and the payment to the bank by appellee had no other effect as to appellant, the maker, than had appellee taken up the notes from the bank without any judgment being taken thereon. Pierce v. Jacobs, 157 Ill. App. 441. We have examined the several cases cited by appellant, but there is nothing said in any of them in conflict with what is said in Pierce v. Jacobs, supra.

With the competent excluded evidence in the record, the court would not have been justified in directing a verdict for the plaintiff. Bechtel v. Marshall, 283 Ill. 486. For the error of the trial court, therefore, in excluding competent evidence and directing a verdict, the judgment is reversed and the cause remanded.

Reversed and remanded.


source: Caselaw Access Project

author: Mr. Presiding Justice Wolfe

license: Public Domain

text:
    Andrew Bakalar, as Administrator of the Estate of Andro B. Stinar, Deceased, Appellant, v. Andrew Stinar and Edward Stinar, Appellees.
    Gen. No. 8,666.
    Opinion filed September 20, 1933.
    Lloyd Painter, for appellant.
    Arthur H. Shay, for appellees.
   Mr. Presiding Justice Wolfe

delivered the opinion of the court.

Andrew Bakalar was administrator of the estate of Andró B. Stinar, deceased, and at the same time was guardian of the estate of Andrew Stinar and Edward Stinar, both by appointment of the county court of Livingston county, Illinois. While acting as such administrator and guardian and without any order of the court therefor, he invested $2,500 in two certain promissory notes, one for the principal sum of $1,500 and one for the principal sum of $1,000, each executed by W. C. Ruddy and Margaret E. Ruddy, dated November 1,1928, and due November 1,1938. The notes bear interest at the rate of 5% per cent per annum, payable annually. The payment of these two notes and of three other similar notes, each for the principal sum of $1,000, was secured by a trust deed executed by Ruddy and his wife conveying 80 acres of farm land in Livingston county.

Edward Stinar, the younger of the two minors, became of age on the 8th day of April, 1932. Soon thereafter Andrew Bakalar filed his final account and report as administrator of the estate of Andró B. Stinar, deceased, and therein set forth that he had a balance on hand of $1,763.75, of which $375.53 was due Andrew Stinar and $224.44 was due Edward Stinar. In that account and report the administrator sought to take credit for $2,000 on account of a portion of the two Ruddy notes for $2,500 above referred to, so that instead of receiving the amount due them in cash, the two heirs, Andrew Stinar and Edward Stinar, would be required to receive a pro rata share of the two Ruddy notes. Thereupon, Andrew and Edward Stinar filed objections to the administrator’s final account and report, protesting that the investment by the administrator of their share of the funds in said Ruddy notes was unauthorized by the court and illegal and praying that the administrator be required by the order of the court to pay to them in cash the amount due them as shown by the final account and report.

The court entered an order finding that Andrew Bakalar had invested certain funds in his hands as administrator of the estate of Andró B. Stinar, deceased, including the amount of the distributive shares of Andrew Stinar and Edward Stinar as well as the distributive shares of the widow, Susie Stinar, together with certain funds in his hands as guardian of the estates of Andrew Stinar and Edward Stinar, minors, and certain other funds, in the two Buddy notes above herein described; that said investment was made without the authority or approval of the court and that the administrator should be and by the order was required to pay to Andrew Stinar and Edward Stinar the respective amounts in cash which the report showed the administrator owed them, together with interest at five per cent per annum from the day the order was entered. From this order the administrator prayed and perfected an appeal to the circuit court.

In the circuit court it appeared that Bakalar had commingled and invested certain funds in his hands as administrator of the estate of Andró B. Stinar, deceased, with funds he held as guardian of the estates of Andrew Stinar and Edward Stinar, minors, together with certain other moneys, in the Buddy notes and he could not tell which sums invested in those notes represented moneys in his hands as administrator nor what part of it represented moneys in his hands as guardian. It further appeared from the testimony of Bakalar that on November 5, 1932, after the order disapproving his final account and report had been entered in the county court and while his appeal was pending in the circuit court, Bakalar, individually, and as administrator of the estate of Andró B. Stinar, deceased, entered into a contract with W. 0. Buddy and Margaret E. Buddy and with Cora Fetzer and Mae Bamme and the board of trustees of the police pension fund of the City of Streator, in which it was recited that Buddy and his wife had executed the notes above herein referred to; that the makers of said notes were indebted thereon in the sum of $5,500, of which Bakalar as administrator held two notes, one for $1,500 and one for $1,000, Cora Fetzer held one note for $1,000, Mae Bamme held one note for $1,000 and the board of trustees, of the police pension fund of the City of Streator held one note for $1,000; that said W. C. Ruddy and wife were unable to pay said indebtedness and, therefore, that said Ruddy and his wife had conveyed the land described in the trust deed by warranty deed to Bakalar as trustee; that the holders of said notes should all release said Ruddy and wife from any and all liability on said notes and that the same should be delivered up to the makers to be canceled; that said Andrew Bakalar, as trustee, should hold the legal title to said real estate until such time as the parties holding at least two-thirds of said indebtedness should request the trustee to convey the premises to a purchaser whom they should secure and in the meantime that the trustee should manage the real estate, lease the same, collect the rents, pay taxes, make repairs and pay the necessary expense of handling the property, including attorney’s fees and the sum of $25 a year to himself as commissions. The contract further recited that the Ruddys had failed to pay the general taxes for 1932 and that the parties of the second part should advance to the trustee when requested their pro rata share of such taxes and all other necessary expenses, including certain legal expenses upon the request of the trustee. The contract further provided that Ruddy and his wife should have the option to repurchase the land at any time prior to November 1, 1934.

Appellees did not sign the contract. They are not mentioned therein and it does not provide that they have or ever shall have any interest in the land, the income therefrom or the proceeds of the sale thereof. The contract cancels the notes in which the administrator claims their funds are invested and gives them nothing whatever in lieu thereof.

On the hearing in the circuit court, substantially the same order was entered as was entered in the county court. From that order, Bakalar as administrator appeals to this court.

The appellant in his brief has cited no authority and we have been unable to find any that sustains his position in this case. The administrator had no right to make these loans of $2,000 even though he was authorized to do so by the county court. It is the duty of the administrator to collect all" money due the estate and after it is collected to apply the proceeds in discharging the claims and obligations against the estate and after this is done to make a distribution of the balance according to law. This administrator knew, or should have known, that the contract with minors might be disaffirmed, and this is what occurred in this case. The facts in this case are not disputed and it is our opinion that the order of the circuit court was proper and in accordance with the law and facts in the case. The judgment of the circuit court of Livingston county is, therefore, affirmed.

Judgment affirmed.


author: Mr. Justice Dove

text:
    Peoples National Bank of Monmouth, Appellant, v. Frank J. Johnson et al., Appellees.
    Gen. No. 8,647.

      Opinion filed September 20, 1933.
    L. H. Hanna, for appellant.
    E. P. Field and Safford*& Soule, for appellees.
   Mr. Justice Dove

delivered the opinion of the court.

Frank J. Johnson and Maude A. Johnson, his wife, executed and delivered to the Peoples National Bank of Monmouth, appellant herein and hereinafter referred to as the bank, their nine promissory notes, dated April 1, 1926, and each due five years after date, with interest at the rate of 5% per cent. These notes were signed by Johnson and his wife, and payable to the order of Frank J. Johnson at the banking house of appellant. The payee, Johnson, indorsed each of the notes in blank and delivered them to the bank. Of the nine notes, three of them were for the sum of $2,000 each, four were for the sum of $1,000 each, and two were for the sum of $500 each. In order to secure the payment of these nine notes, Johnson and his wife executed and delivered to the bank a mortgage, by which they mortgaged and warranted to appellant 160 acres of land in Henderson county. This mortgage recited that it was given to secure the nine notes aggregating $11,000 and it was filed for record on April 5, 1926.

Subsequently the bank sold and transferred all of these nine notes, before maturity, for their full face value, together with accrued interest, to various different parties. Two of the $1,000 notes were sold and transferred by the bank shortly after their execution to Anna Frandsen, who continued to own, hold and receive the interest thereon for more than four years. On May 5, 1930, Anna Frandsen, represented by her brother, who was cashier of the bank, exchanged these two $1,000 Johnson notes, to the bank for other notes executed by customers of the bank of an equal amount, which were then held and owned by the bank, and from May 5, 1930, the bank has held and owned these two $1,000 notes.

On April 1, 1931, the makers of the said nine notes defaulted in the payment of principal and interest on each of the notes, and on July 15, 1931, the bank filed its bill to foreclose the mortgage. Subsequently an amended bill was filed and Mildred Patterson Thomo son, owner and holder of the three $2,000 notes, and Ida Paxton, owner and holder of one of the $500 notes, joined the bank as complainants. In this amended bill Mary C. Webster, administratrix of the estate of Jane Broderich, deceased, owner and holder of one of the $1,000 notes, H. U. Scott, trustee, also an owner and holder of one of the $1,000 notes, and the Cemetery Board of Managers of the City of Monmouth, owner and holder of the other $500 note, were made defendants. Answers and cross-bills were filed, and after the issues were made up, the cause was referred to the master, and subsequently the chancellor entered a decree as recommended by the master.

The decree, after finding the facts as herein recited, found the amount due the respective holders of the several notes and that the lien of the mortgage stands as security first for the payment of the several amounts so found due the holders of said notes other than appellant, and secondly for the payment of the amount found due upon the two notes owned by the bank. The decree further found that the complainants and cross complainants, other than appellant, were entitled to share pro rata in the proceeds of any sale that may be had of said mortgaged premises, and that their notes and their lien are entitled to priority over the two $1,000 notes held by the bank and that the lien of said mortgage, so far as the same secures the notes owned by the parties other than the bank, is superior to the lien of said mortgage so far as it secured the two notes held and owned by the bank. The decree ordered that the bank should receive no part of the proceeds of the sale of the premises until the amounts so found due the holders of the other notes were paid in full and that appellant would then be entitled to any surplus arising out of the sale of the premises up to the amount so found due upon its two notes. From this decree the bank brings the record to this court for review by appeal.

It is conceded by counsel for the respective parties that the only question involved is whether appellees, as assignees of some of the several notes secured by the mortgage foreclosed in this proceeding, are entitled to priority over appellant or whether appellant, the owner and holder of two of the notes, should share pro rata with the other note holders in the proceeds which may be derived from a sale of the mortgaged premises to the extent of the amount due it upon the tv/o notes which it held and owned when it commenced this suit.

Counsel for appellant cite a number of cases from other jurisdictions which support its contention and call our attention to the case of Humphreys v. Morton, 100 Ill. 592, and insist that it holds that when a mortgage is given to secure the payment of several notes, it is an incumbrance for the security of all the notes in whosesoever hands they may be until all are paid. In that case the trust deed sought to be foreclosed was executed by the Peoria, Pekin and Jacksonville Railroad Company to secure the payment of certain bonds issued by the company and all dated May 21,1864, and all due July 1, 1894. The interest had been paid upon certain of the bonds prior to January 1,1878, but upon others none of the interest coupons had been paid for several years previous to that date, and it was contended that these interest coupons that had not been paid should be first paid before there should be a general pro rata distribution of the fund arising from the sale of the mortgaged property. The court held that the language of the trust deed implied that if there was not money enough realized from the sale of the mortgaged property to pay all the bonds and interest, then the same should be paid pro rata and that each bond and its unpaid interest was entitled to its pro rata share — in other words, that the holders of the bonds upon which interest had not been paid should have no priority as to the payment of such interest over the holders of other bonds upon which the interest had been paid. The question of priority between the mortgagee, as assignor, and an assignee of bonds secured by the trust deed did not arise in that case and there is nothing said in that opinion which is determinative of the question presented here.

Pomeroy’s Equity Jurisprudence, vol. 3, sec. 1203, states the rule applicable to the facts as they appear in this record as follows: “When the mortgagee assigns one or more of the notes, and retains the remainder of the series, it is generally held that the assignee is entitled to a priority of lien as against the mortgagee, with respect to the note or notes so transferred; and this rule operates without regard to the order in which the notes held by the two parties mature. . . . The mortgagee having transferred the note and received the consideration therefor, it would be inequitable for him to deprive the assignee of any part of its value, by insisting upon a priority or even an equality of right in sharing the insufficient proceeds.”

There is a very full and exhaustive annotation which has to do with priorities as between holders of different notes secured by the same mortgage in 50 A. L. R., beginning on page 543. The better rule, says the author of this annotation, as between an assignor and assignee is that the assignee shall be preferred in the distribution of the proceeds of a sale of mortgaged property, and after quoting the rule as found in Pomeroy’s Equity Jurisprudence, supra, makes the following comment, viz.: “The correctness of the statement of this eminent authority is hardly open to question; and an examination of reported cases shows that the rule as stated is supported by numerous decisions.” 50 A. L. R. 564. The decisions in the several States are collected and referred to and it is stated that, while in a few cases the courts have held that a mortgagee is not precluded, by virtue of an assignment of one of several notes held by him, secured by the same mortgage, from competing with his assignee in the proceeds of the mortgaged property, still the majority of the courts hold otherwise.

In 27 Cyc. 1303, it is stated that when a mortgage is given to secure the payment of several different notes, it is an incumbrance upon the land for the security of all and each of the notes, in whosesoever hands they may legally be, until all are paid and when a part of the notes so secured are assigned, it is a question whether the whole mortgage or a part of it, or any interest therein, is assigned, depending upon the intention and agreement of the parties. Where the holder of several notes secured by a mortgage transfers one, retaining the others, the mortgage lien accompanies the assignment of the debt as an incident, and in case the proceeds of the mortgage are not sufficient to pay all the debts, the holder of the assigned debt has a preference and the assignor cannot compete with him. As supporting this doctrine, cases are cited from Alabama, Georgia, Indiana, Kentucky, Louisiana, Massachusetts, Minnesota, New Jersey, New York, Ohio, Rhode Island, Texas, Virginia and Wisconsin.

In 41 C. J. 687, it is said that although the mortgagee upon assigning a part of the mortgage notes may reserve a proportion of the security for the notes retained by himself, he can do so only under a distinct agreement to that effect with the assignee. The author of this article, however, goes on to say that where the assignee had no reason to believe that he was to be preferred to his assignor, having had notice of the latter’s lien, the rule that he is estopped to compete with the assignee should the proceeds be insufficient to satisfy the debt is inapplicable.

In Berry v. Van Hise, 148 Ga. 27, it was held that where a mortgagee transfers some of the notes secured by the mortgage and retains others, the holder of the transferred notes has a preference over the mortgagee if the security is insufficient to pay all the notes.

In Knight v. Ray, 75 Ala. 383, it appeared that Knight, the mortgagee, held three notes secured by a mortgage and transferred one of the notes to Mrs. Bay, retaining the other two and in holding that Mrs. Bay was entitled to a priority, the court said: “While the notes remained the property of Knight, the mortgaged lands were equally bound for the payment of each. When, however, Knight traded and transferred one of these notes to Mrs. Bay, retaining the others, although the transfer was by mere delivery, he clothed her with the right to be first paid out of the mortgaged property. ’ ’

In Lawson v. Warren, 34 Okla. 94, 124 Pac. 46, 42 L. R. A. (N. S.) 183, it appeared that Bobert M. Lee had executed two notes, each for $1,500, due respectively on October 1, 1908 and October 1, 1909. These notes were secured by a vendor’s lien and were assigned, before maturity, for value, to the Arnold Mercantile Company, which indorsed for value the note due October 1, 1908 to Warren, the plaintiff. Subsequently Lewis C. Lawson was appointed receiver of the Arnold Mercantile Company and the note due October 1, 1909, came into his hands as such receiver. In sustaining the decree of the lower court, which foreclosed the vendor’s lien and ordered the property sold and the proceeds distributed, first, to the payment of the amount due upon the note held by Warren and the balance upon the note held by Lawson, the court stated that the question of priority of a series of notes secured by one mortgage when in the hands of different parties was a question upon which there is great diversity of opinion, and refers to the fact that one class of cases, holds that the notes shall be paid in the order of their assignment and another class that the notes should take precedence in the order of their maturity and a third class that the proce'eds should be applied pro rata in part payment of the several notes, irrespective of their dates of maturity or assignment. The court then said that the doctrines laid down by the two classes of decisions first mentioned were not sustained by reason or equity, and that the holders of notes irrespective of the order of assignment or the maturity of the notes are entitled to participate ratably in the fund derived from the security. The court in its opinion then says:

“This is not a conflict between two assignees, but is a conflict between the assignee of the first note and the receiver holding the second note, and as such, standing in the shoes of Arnold Mercantile Company. In this case the second note was retained by the Arnolfi Mercantile Company, and, as between it and Warren, its assignee, equity would require that its assignee be first paid out of the mortgage fund. ‘An assignee of the mortgage with part of the debt is generally entitled to payment in preference to the mortgagee who retains one of the notes. . . . Where a holder of a mortgage assigns a part of it, although he warrants only the existence of the debt at the time of the transfer, it would be contrary to good faith to permit him, after receiving the money for this part of the claim, to come into competition with his assignee, if the property prove insufficient to pay the claims of both. Unless the intention be plainly declared on the face of the assignment that the assignee is to share pro rata in the security with the assignor, the equitable construction of it is that it must in the first place be applied for the payment of the part of the debt which was assigned.’ Jones Mort. 6th Ed. sec. 1701. . . . The reason the assignee is to be preferred is founded on the plainest principle of equity. When two notes are assigned to different persons, they are both presumed to have paid value, and they must share equally in the proceeds of the mortgaged property in order to preserve the equality which is equity. But to apply the same rule between the mortgagee and a person to whom he had transferred one of the notes would lead to inequality. For illustration, say that the mortgagee holds two notes for $1,000 each. He assigns one of them for value. The property securing their payment only brings $1,000, or enough to pay one note. If the mortgagee shares in the proceeds he will get out of the debt $1,500, the $1,000 he received for the first note and the $500 he receives from the proceeds of the mortgaged property, while the assignee for half the debt only receives $500. The mortgagee would thus receive more than if he had kept both notes. This is not right.” (See note on priority as between holders of different notes secured by the mortgage in 42 L. ft. A. [N. S.] 183.)

“Where a person holding all of a series of notes secured by mortgage assigns one of them the assignee is considered to be entitled to be preferred to the assignor and the receiver of the assignor in the distribution of the proceeds of the mortgaged property.” 19 R C. L. 659.

“If a mortgagee assigns one or more of several notes secured by the same trust deed or mortgage, and retains the remainder, the assignee is entitled to priority of lien, as against the mortgagee with respect to the note or notes so transferred, without regard to the order in which the notes mature.” Reeve Illinois Mortgages, Yol. 1, page 280. In support of the foregoing statement of the law, the author cites Kuppenheimer v. Chicago Title and Trust Co., 163 Ill. App. 127. In that case it appeared that Emil Dickman executed nine notes, three of which were due one year after date, three due two years after date, and three due three years after date. Each note was made payable to the order of himself and by him indorsed and delivered to Kuppenheimer. At the same time Dick-man executed a trust deed to secure the payment of these notes. One of the notes maturing two years after date was transferred by Kuppenheimer to the Chicago Title and Trust Company, and one of the notes maturing three years after date was transferred by Kuppenheimer to Christiana Brachvogel. Subsequently Kuppenheimer died testate, and at the time of his death he was the owner of an undivided two-fifths in four of the notes, two of which matured two years after date and the remaining two matured three years after date and the remaining two of which matured three years after date. A bill was subsequently filed to foreclose this trust deed, and after holding that the Chicago Title and Trust Company was entitled to priority of payment of its note maturing two years after date as against those held by the parties to the proceeding maturing three years after date, the court found that Christiana Brachvogel, as assignee, was entitled to priority for the amount due on her note as against those complainants who had taken title to the interest in these notes which Kuppenheimer had at the time of his death.

We do not find that the question presented by this record has been determined by our Supreme Court, and in the absence of a controlling decision, this court must adopt the rule which other courts of the highest respectability have adopted and followed, especially when such a rule coincides with our conception of equity and fair dealing. This rule is that it would be inequitable to permit appellant, as assignor, to deprive appellees, who are assignees, of any part of the purchased value of the notes which they acquired from appellant. Appellant should not therefore be permitted to share in the proceeds derived from the sale of the mortgaged property in the event such proceeds are insufficient to pay the assignees upon these notes.

It is well settled in Illinois that a mortgagor executing an instrument to secure the payment of several notes may incorporate therein a provision regulating the order of payment of the notes so secured and may provide that all the notes are equally secured without preference or priority. People for use of Kaskaskia Commons Permanent School Fund v. Mitchell, 223 Ill. App. 8; Good v. Woodruff, 208 Ill. App. 147. The mortgage foreclosed in this proceeding did not provide, as many trust deeds and some mortgages do, that the notes thereby secured were on an equal footing and equally secured without any preference or priority whatsoever to the owner or owners of any of them. Appellant was the mortgagee and in the absence of some such provision, we hold that along with the sale and delivery of the notes to its cocomplainants and to cross complainants below, went an equity and this equity entitled the assignees to a preference over appellant in this proceeding.

The fact that the two notes now held by appellant were, shortly after their execution, sold by appellant to Anna Frandsen, and subsequently, but prior to their maturity, repurchased by appellant from her, cannot and does not affect this equity and can make no possible difference in this case. The reason for the rule which gives appellees a preference is the same, and is just as applicable whether appellant owned the notes since their execution or whether during a part of the time since their execution it had the use of Anna Frandsen’s money. In our opinion, the finding and decree of the chancellor is in accord with the weight of authority, is equitable and correctly determines the priorities of the parties to this proceeding. The decree of the circuit court is affirmed.

Decree affirmed.


author: Mr. Presiding Justice Edwards

text:
    Iva Ragland, Defendant in Error, v. A. T. Ragland, Plaintiff in Error.

      Opinion filed September 18, 1933.
    J. E. Carr, for plaintiff in error.
    Frank E. Trobaugh, for defendant in error.
   Mr. Presiding Justice Edwards

delivered the opinion of the court.

On November 17, 1931, in the city court of West Frankfort, Iva Ragland, defendant in error herein, was awarded a divorce from her husband, A. T. Rag-land. The latter then sued out from this court a writ of error to review such decree.

Defendant in error filed two pleas, averring that the writ of error should not be maintained for the reason that plaintiff in error was in contempt of the orders and decree of the trial court, the first of which alleged such facts generally, the latter setting forth the purported contempts, and the orders of court finding him to be in contempt, in detail and at length; also, that after the writ of error was sued out, she had procured from the city court an order for suit money to enable her to follow and defend the writ of error, and that plaintiff in error failed and refused to comply with the order, and stands in contempt thereof.

To the pleas replications were filed, after which defendant in error demurred, and the sufficiency of the replications is the question before the court for determination.

The replication to the first plea alleges that repliant had not been adjudged guilty of contempt of court on May 3, 1932, the date of suing out the writ of error, and that the purported contempt order referred to in the plea was made and filed on May 21, 1932, or about -20 days after filing the transcript of record, abstract, brief and argument in this court, and that L. P. Harriss directed the city court clerk to file such order as of April 20, 1932; that he had not been served with any notice relative to same; that he did not absent himself from the State or evade service of process, and that so far as he knew, no proceedings were had in such court between the dates March 28, 1932, and May 21, 1932.

The rule relating to replications is the same as respects pleas. The replication must answer so much of the plea as it professes to answer, and if it is bad in part, it is bad in its entirety. People v. Union Gas & Electric Co., 260 Ill. 392.

It will be observed that the replication, in effect, admits the existence of the contempt order, and seeks to avoid its force by averring that it, in fact, was made on May 21, 1932, and ordered filed back by L. P. Harriss as of the date April 20, 1932. Who L. P. Harriss was, or what his connection with, or authority, in the matter, is not set forth, and whether it was an order which the court had no right or authority to enter is not alleged. We do not think it can be said that the replication sufficiently answers the averments of the plea when tested by the usual rules of pleading, especially when the pleading is construed most strongly against the pleader. Ward v. Williams, 278 Ill. 227. Moreover, it is self-contradictory, charging that the order in question was “made and filed on the 21st day of May, ’ ’ and then, further, that L. P. Harriss directed the city court clerk to file same back as of April 20, 1932. It could officially be filed in the cause but once, hence the averments are repugnant to each other.

To the second plea, the replication filed against it, with detail, attempted to answer its averments; it did not, however, reply to the allegations of the plea which charge that on May 21, 1932, the city court entered its order directing plaintiff in error to pay to defendant in error, by the first day of June, 1932, the sum of $250 as her reasonable suit money to enable her to defend this writ of error, which order was entered after the same was sued out. It is further charged in the plea that the plaintiff in error has wholly failed to comply with the terms of such order, or to make payment as required therein, but that as to such order he defies the court and stands in contempt thereof. This was a material element of the plea, and the mere fact that such order was entered after the writ of error was sued out did not deprive the court of jurisdiction to entertain the motion and make the further order in the case.

The statute creates, in cases of divorce, an exception to the general rule that with the consummation of an appeal, a court has no further authority to make orders in the case, as it, in direct terms, permits the court, after an appeal has been perfected from a decree awarding her a divorce, to grant and enforce an order requiring the husband to pay to his wife the reasonable and necessary cost of defending her cause upon a review of the case. Cahill’s St. ch. 40, If 16 (sec. 16, ch. 40, Smith-Hurd R. S. 1931). Elzas v. Elzas, 183 Ill. 160; Jenkins v. Jenkins, 91 Ill. 167.

The replication purported to answer the whole plea, but, as indicated, failed to reply to at least one material and important element; hence, within the rule of People v. Union Gas & Electric Co., supra, was insufficient.

Authority of law exists in the courts to permit amendments to pleadings of this nature; Austin v. Bainter, 40 Ill. 82; Brayton v. Brayton, 258 Ill. App. 487, and we think plaintiff in error should be accorded opportunity, if he so desires, to amend the replications.

The demurrers to the replications will be sustained, and leave granted plaintiff in error to apply, at the first day of the next term, if he be so advised, for leave to amend the same.

Demurrers sustained.


text:
    Valinda M. Meyer, Appellee, v. All-Electric Bakery, Inc., and Anheuser-Busch, Inc., Appellant.

      Opinion filed September 18, 1933.
    Pope & Driemeyer, for appellant.
    P. K. Johnson, for appellee.
   Mr. Presiding Justice Edwards

delivered the opinion of the court.

During the summer of 1930, the All-Electric Bakery, of Belleville, having completed the erection of a new plant, planned a dedication for the benefit of its patrons, as well as to advertise its business, and arranged for the event to occur on August 23rd. It sent out printed invitations to the public, and among others receiving one was Valinda M. Meyer, the appellee.

Appellant, Anheuser-Busch, Incorporated, of St. Louis, Missouri, of whom the bakery was a customer, and from whom they bought yeast in large quantities, was the owner of a performing mule. The bakery company applied to the appellant for the loan of the mule, as a part of the entertainment, at its opening and dedication. The request was granted, and on the day, the animal was taken by truck, accompanied'by its trainer, to the baking plant in Belleville.

There was no compensation paid for the loan of the mule, and the employees who accompanied it were in the pay of appellant. They -were directed by the latter’s agent-to report to Mr. Heisler, the head of the baking concern, to take their orders from him, and to use every effort to make a satisfactory showing for him. Upon arrival in Belleville, these employees reported to .Mr. Heisler, and asked for orders. He gave them shirts to wear, of white material, lettered in red on the back, “All-Electric Bakery, Inc.”; then furnished them with a guide, and directed them to give a performance upon the public square, then to drive about the city, advertising and announcing the opening, after which they were to return to the bakery to give further exhibitions for the benefit of the assembled guests. All these orders they carried out, they being directed about the city by the guide furnished them by Mr. Heisler. During the evening the mule performed, at intervals, in the portion of the building which the bakery used as a garage.

Appellee was then present and witnessed one of the exhibitions, at about 10 o ’clock. The trainer was guiding the mule around the ring, at the conclusion of the performance, and just previous to leading it out. As it passed where she was standing, it kicked, striking her in the right breast and causing the injuries of which she complains. She brought suit in the circuit court of St. Clair county against both the bakery company and appellant. There was a verdict and judgment against both defendants, in the sum of $7,000, from which appellant alone has appealed.

It is asserted on the part of appellant that it is not liable for the damages consequent upon the injury, for the reason that the mule, at the time, was in charge of its trainer, who was presently the servant of the bakery, and that it then had no control over the trainer or the animal, and no right to direct its conduct or actions; that it had loaned them to the baking company, and at such time they were freed from any directions or control by appellant.

The rule appears to be established by the weight of authority that a servant who is generally employed by another may, with his acquiescence or consent, be loaned by his general employer to a third party for the rendition of a special service, and thereby become the servant or employee of the latter, in the performance of such special work. Allen-Garcia Co. v. Industrial Commission, 334 Ill. 390; Scribner’s Case, 231 Mass. 132, 120 N. E. 350; Cayll v. Waukesha Gas & Electric Co., 172 Wis. 554, 179 N. W. 771; Westover v. Hoover, 88 Neb. 201, 129 N. W. 285.

The rule is simple and of easy understanding, though its application to the facts of a particular case is sometimes attended with difficulty, as whether the person employed is the servant of the general or the special master, is a question of fact. Consolidated Fireworks Co. v. Koehl, 190 Ill. 145.

In Allen-Garcia Co. v. Industrial Commission, supra, at page 394, the Supreme Court, in its latest expression on the subject, has stated: “The test whether or not the workman, in the performance of the special work for which he is lent, becomes the employee of the person to whom he is lent, is whether or not he becomes for the time being wholly subject to the control and direction of the person to whom he is lent for the special service being performed and freed during such time from the direction of his master.”

It will be observed that the mule and the servants in charge of same were sent by appellant to the bakery, under directions to report to the latter’s officers, to take orders from them, and use every endeavor to please them; that the latter did give directions as to the times and places of the exhibitions, which were obeyed by those in charge of the mule. True, the latter were in the pay of appellant, but this alone would not determine that they were, at the particular time, its employees. Allen-Garcia Co. v. Industrial Commission, supra, at page 397; Indian Hill Club v. Industrial Commission, 309 Ill. 271.

It seems clear they were at the time subject to the direction and control of the baking company, and not amenable to any orders from appellant. The former had the right to, and did, direct the places and times of the exhibitions, and could stop or continue them at will, without interference on the part of appellant. It appears evident that all parties to the loaning of the act considered that the baking company should have exclusive control of the same, during the period of the loan, and that during such time it was freed from any directions of the Anheuser-Busch Company.

In our opinion the evidence establishes that during the period from when the mule and its attendants arrived at the bakery until the conclusion of the last exhibition, it and its escorts were under the exclusive control of, and in the employ of, the baking company, and not subjective to orders or directions of appellant; hence within the rule as stated, the latter, not then being the employer, was not liable in the pending action, and the judgment against it was unwarranted.

For which reasons the judgment is reversed.

Judgment reversed.

Finding of fact: We find, as a fact, that at the time the injury in question was occasioned, the trick mule and its attendants were lent to the All-Electric Bakery, Inc., were subject to its exclusive control and management, and were free during such time from the directions of appellant.


text:
    August B. Spiegel, Appellee, v. John Frangoulis, Appellant.

      Opinion filed September 18, 1933.
    Harry Faulkner and Henry B. Eaton, for appellant.
    Wesley Lubbers, for appellee.
   Mr. Presiding Justice Edwards

delivered the opinion of the court.

Hope Motor- Company, having its place of business in Granite City, was incorporated October 1, 1928. Thirteen months later, or on October 28, 1929, appellee purchased 10 shares of its common stock for $1,000. Appellant, John Frangoulis, was then its president, and signed the stock certificate. On February 27,1931, the circuit court of Madison county, in a proceeding brought for the purpose, declared the corporation insolvent, and entered a decree for its dissolution and winding up its affairs.

September 14, 1932, appellee brought suit against appellant under the Illinois Securities Act, Cahill’s St. ch. 32, Hfi 25A-296 (being secs. 96 to 137, ch. 1211/2, Smith-Hurd E. S. 1931), to recover the $1,000 paid for the stock, together with the attorney’s fees provided for by section 132 thereof. The suit was based upon the proposition that the stock involved was of the character defined by the act as Class “D” and that appellant, or the corporation, had not, before selling same, complied with the statute in the matter of filing in the office of the secretary of state, the required documents, statements and information.

Appellant pleaded the general issue; there was a trial before the court and a jury. At the conclusion of appellee’s case, appellant not offering any evidence, the court directed a verdict for appellee in the sum of $1,250, being the $1,000 expended for the stock, and $250 which was claimed as .an attorney’s fee, under the statute. From the judgment rendered on the directed verdict, appellant has perfected this appeal.

The chief ground relied upon for reversal is that the proof of appellee fails to show that the stock was Class ££D.”

The statute defines four classes into which the securities are divided, “A”, ££B”, <£C” and ££D”. Section 99, Cahill’s St. ch. 32, U 257, designates what securities shall be of Class ££A”. Section 100, Cahill’s St. ch. 32, f 258, does likewise concerning those of Class ££B”. Section 101, Cahill’s St. ch. 32,- H 259, defines and states those which shall constitute Class ££C”; while section 103, Cahill’s St. ch. 32, ft 261, provides that all securities other than those falling within Classes ££A”, £‘B” and ££C” shall be known as securities in Class ££D”.

As to the evidence bearing upon the question, it appears that appellee, while testifying, was asked the question: “Who was Hope Motor Company; was it an individual or a corporation!” Answer: “It was incorporated in Illinois.” Also the further question: “Generally, what was their line of business; what were they incorporated for!” To which answer was made: “To sell automobiles.” No objection was made to these questions; neither was there objection to the answers, nor motion to strike. The proof further showed that the place of business was in Granite City.

This testimony, by a stockholder of the concern, who, because of his interest in same, must be considered as having some knowledge of its character and the nature of the business for which it was chartered, standing-alone and undisputed, was sufficient to establish that Hope Motor Company was an Illinois corporation, engaged in the business of selling motor cars, and was in fact an ordinary mercantile concern.

A close and careful study of the many enumerations of securities, designated in sections 99 and 100, Cahill’s St. ch. 32, Ü1Í 257 and 258, relating to securities belonging to Classes “A” and “B”, will reveal that the common stock of the Hope Motor Company, a corporation engaged in selling* motor cars, and whose stock was sold in the usual course of business to divers persons, did not possess a single element that would warrant its being considered as securities of either Class “A” or Class “B”.

Section 101, Cahill’s St. ch. 32, Ü 259, provides that “those issued by a person, corporation, . . . owning a property, business or industry which has been in continuous operation not less than two years, and which has shown during- a period of not less than two years prior to the filing- of the statement herein provided for, average annual net profits,” etc., shall he regarded as securities in Class “C”.

Here the corporation was chartered October 1, 1928. The stock was sold October 28, 1929, and no required statement on file in the office of the secretary of state. The Hope Motor Company had not been “in continuous operation not less than two years”; hence, obviously, its common stock could not be a Class “C” security.

It appearing that the stock (not coining within the statutory designations of Classes “A”, “B” or “C”) can only be, as provided by said section 103, Cahill’s St. ch. 32, H261, known as belonging to Class “D”; and as aptly stated in Abrams v. Love, 254 Ill. App. 428, at p. 434, “since there is nothing to show that the securities belong to either Class ‘A’, ‘B’ or ‘C’, there is no other place for them to lodge, except' as Class ‘D’ securities.”

We are of opinion that the evidence of appellee, undisputed, was sufficient to justify the inference that the securities in question were of Class “D”.

It is contended that the court erred in admitting the secretary of state’s certificate of noncompliance, for the reason, among others, that the secretary of state who certified to the facts had gone out of office at the time the case was tried. The certificate appears to be in proper form, and was signed by the official who occupied the position at the date of its execution. We do not think it necessary that the certificate be attested by the officer who happened to be the incumbent at the time the instrument was offered. We think the ruling of the court was right.

Other objections to evidence have been argued. However, in view of the record, we do not think it necessary to consider them. In our opinion there was sufficient to justify the finding that appellee had a cause of action for the $1,000 paid for the stock, and that the judgment to that extent is right.

There was a stipulation of record, to the effect that appellee had contracted with his attorney to pay him 50 per cent of any recovery he might have in the case. Appellant asserts that this agreement bars appellee’s right to attorney’s fees, and with this we are in accord.

Said section 132, Cahill’s St. ch. 32, If 290, provides that where a purchaser of securities shall prevail in a suit, such as this, the judgment shall be “for the amount paid, the consideration given or the value thereof, together with his reasonable attorney’s fees in any action brought for such recovery.”

It seems clear to us that the attorney’s fees contemplated by this section are those which the purchaser of the securities either has paid to his attorney for the service or the amount which he has become obligated to pay therefor, and does not refer to situations like the present case, where the client has not paid, nor engaged to pay, the attorney for the service rendered, but has agreed to give him therefor a portion of what he may recover, it being contingent upon his prevailing in the suit, without any personal liability of appellee. We think this portion of the judgment was wrong, and that same should be remitted.

If appellee will file in the office of the clerk, within 15 days, a remittitur in the sum of $250, the judgment will be affirmed in the sum of $1,000; otherwise reversed and remanded.

Affirmed upon remittitur; otherwise reversed and remanded.


text:
    Margaret H. Williams, Appellee, v. The Prudential Insurance Company of America, Appellant.

      Opinion filed September 18, 1933.
    Kramer, Campbell, Costello & Wiechert, John C. Roberts and Warnock, Williamson & Burroughs, for appellant.
    Cullen, Fauntleroy & Edwards and M. R. Sullivan, for appellee.
   Mr. Presiding Justice Edwards

delivered the opinion of the court.

Lou P. Williams, at the date of his death, July 6, 1931, was the holder of a policy of life insurance in The Prudential Insurance Company of America, appellant herein. The face of the policy was $5,000, and in addition, the contract contained a provision for an accidental death benefit of $5,000," if such, death occurred, while the policy was in force, “as a result directly and independently of all other causes, of bodily injuries, effected solely through external, violent and accidental means.” Contained also in the same paragraph was the further condition that no accidental death benefit should be payable if the death resulted from certain enumerated causes, “or directly or indirectly from bodily or mental infirmity or disease in any form.”

On the day mentioned, Williams, while engaged in a card game in his pool room, was requested by his wife to come to supper, their living apartment being over the pool room. He suddenly became violent, struck and beat his wife, and struck at an employee who sought to interfere in her behalf; broke up furniture, then went upstairs, overturned the supper table, breaking dishes, and spilling the food over the floor; after which he went to his bedroom,' and engaged in loading a rifle. A police officer, who had been called to quell the disorder, went into the hallway leading to his room, told Williams to put the gun down, as he had caused enough trouble. Williams then arose from his chair, said he was going to kill them all, and lifted the rifle to his shoulder, at which the officer shot and killed him.

Action was brought on the policy for its face amount of $5,000, together with the additional accidental death benefit of $5,000. The declaration was in the usual form, to which was pleaded the general issue, and plea of tender of $5,015, the face of the policy and accrued interest. To the special plea, Margaret H. Williams, beneficiary in the policy and appellee herein, filed her replication, accepting the tender to the amount of $5,015, as a portion of her demand, and that as to such amount her claim was satisfied.

The jury returned a verdict in favor of appellee, assessing her damages at $10,015, with interest at five per cent on $5,000 from Sept. 21, 1931, to "June 21, 1932. Motion for a new trial was overruled and judgment rendered on the verdict, from which this appeal is prosecuted.

Appellee’s theory was that deceased was temporarily insane at the time of, and just before, the shooting took place, hence was incapable of yielding his conscious consent to his own violent acts which caused the calling of the police officer, and resulted in his death; and that his passing in the manner, as indicated, was an accidental death within the meaning of the policy.

If the deceased consciously provoked or induced the acts that caused his death, the result would not be accidental, for the reason that it would he a natural and probable consequence of his conduct. If, however, he was at the time mentally deranged, to the extent of not knowing or realizing what he was doing, or appreciating the effect, then he was legally irresponsible for his conduct, and his death by violence would be regarded as accidental. Woodmen of the World v. Dodd (Tex. Civ. App.), 134 S. W. 254; Howle v. Eminent Household of Columbian Woodmen, 118 Ark. 226, 176 S. W. 313; Employers’ Indemnity Corp. v. Grant, 271 Fed. 136, 20 A. L. R. 1118. Whether Williams was or was not insane at the time was a question of fact to be submitted to the jury under proper instructions.

Proof was offered on the part of appellee, by a doctor and several lay witnesses, that deceased was in fact insane. Appellant objects that there was not sufficient basis for the expression of opinion by the non-expert witnesses. Whether such witnesses have sufficient knowledge to express an opinion as to the sanity of another, is to be determined by the trial court. Martin v. Beatty, 254 Ill. 615. We do not think the court erred in permitting the admission of this proof.

The giving and refusal of instructions are also assigned as error. The first given at the instance of appellee told the jury, in substance, that notwithstanding they might believe the insured’s death was provoked by his own conduct, yet if they further believed that he was then insane and unable to distinguish between right and wrong, that they should find his death was accidental. It is objected that the legal proposition therein stated is incorrect. Under the authorities previously cited, we are of the opinion that the principle enunciated was right. It is also argued that there was no evidence upon which to base the proposition whether he had sufficient intelligence to distinguish between right and wrong. The opinions of the witnesses, based upon their observation of and contact with Williams, were before the jury, and it was for the latter to draw therefrom the inference whether he was able to distinguish between right and wrong, and to make their finding accordingly. We do not think the point is well taken.

The court refused to give for appellant an instruction, which was: “The court instructs the jury that in the policy sued on in this case, it is.provided that no accidental death benefit shall be payable if the death of the insured resulted directly or indirectly from mental infirmity. And if you believe from the evidence in this case that the death of the insured, Lou P. Williams, was caused directly or indirectly by his own mental condition, at the time in question, then his death was not effected by accidental means, the plaintiff is not entitled to recover, and you should find the issues in favor of the defendant. ’ ’

The term, “bodily or mental infirmity or disease in any form,” as used in the policy, has been construed by the courts of different jurisdictions, and the current of authority appears to be that such words relate to some ailment, disorder or derangement which, in its character, is somewhat fixed and settled, and does not refer to one which is slight or temporary and over in a short period of time, which, when it has been recovered from, leaves the condition of body or mind as it was previous to the disability. Meyer v. Fidelity & Casualty Co. (Iowa), 65 N. W. 328; Brown v. Metropolitan Life Ins. Co., 65 Mich. 306, 32 N. W. 610; Manufacturers’ Accident Indemnity Co. v. Dorgan, 58 Fed. 945, 951.

We are of opinion that even if deceased was insane at the time of the occurrence, such insanity would not be the mental infirmity referred to in the policy, within the rule of the cases cited, unless it was in some degree fixed and settled in its character; and whether or not it was so established, or was merely transitory and temporary, was a question of fact. The instruction did not leave the question to the jury, but directed a verdict if they found the mental condition of Williams, directly or indirectly, caused his death, without regard to degree or character of mental condition. The instruction was properly refused.

By the second given instruction for appellee, the jury were charged that if they found from the evidence that deceased met his death by external, violent and accidental means, while in good standing under the policy, the verdict should be for the plaintiff, for $10,015, with interest at five per cent on $5,000 from Sept. 21, 1931, to June 21,1932.

This was clearly wrong. Appellee had, by her replication, accepted appellant’s tender of $5,015. This was a satisfaction of her claim to that extent. Thereafter, the sum embraced in the accepted tender was not the subject of litigation, and could not be an element of the jury’s award or the court’s judgment. McConaughy v. Huston, 142 Ill. App. 230. The only moneys in controversy after appellee, by her replication, had accepted the tender, was the $5,000 claimed as the additional indemnity for the alleged accidental death of Williams. The effect of the instruction would naturally be to mislead the jury.

Appellee’s third given instruction was: “In this case you must return a verdict for plaintiff, and the only matter for you to determine is the amount which you may believe plaintiff is entitled to recover under the evidence and all the instructions given you by the court. ’ ’

Here was a peremptory instruction directing a verdict for plaintiff, at all events, notwithstanding a portion of the claim had ceased to be the subject of litigation, and the balance was disputed. Its probable result would be to confuse the jury, cause them to believe that appellant was in the wrong, and incline them, to find for appellee upon the one element of damages remaining in the case, and which was contested. Especially is this true in view of the fact that the only evidence before the jury bore upon the question of the beneficiary’s right to recover under the accidental death clause; hence the jury would likely conclude that the court’s direction, that they must find for the appellee, was that they must do so upon the only issue before them, upon which there was proof.

Moreover, this was at variance with appellant’s fifth given instruction which directed the jury to find the issues for appellant unless they found from a preponderance of the evidence that the death of the insured was caused solely by accidental means; while instruction number three for appellee told them they must find for her, without qualification or restriction except as to amount. The jury would naturally be confused, if not misled, by the conflicting instructions. City of Macon v. Holcomb, 205 Ill. 643.

For the errors indicated, the judgment is reversed, and the cause is remanded.

Reversed and remanded.