text:
    G. L. Drollinger and Ben Drollinger, Trading as G. W. Drollinger & Sons, Appellants, v. Erwin E. Cowen et al., Appellees.
    Gen. No. 32,929.
    Heard in the' first division of this court for the first district at the October term, 1928.
    Opinion filed January 21, 1929.
    Louis W. Mack, for appellants.
    A. S. and E. W. Froehlich, for appellees.
   Mr. Justice Matchett

delivered the opinion of the court.

This is an appeal by the complainants from a decree which sustained a general demurrer of the defendants to the bill of complaint and dismissed the same for want of equity at complainants’ costs.

The bill was brought to secure the foreclosure "of an alleged mechanic’s lien and for general relief. It is urged that the bill is defective for want of a necessary party — Ben Drollinger.

A motion was heretofore.made to dismiss the appeal for the reason, as alleged, that the only party complainant was Gr. L. Drollinger, known as Leo Drollinger, while the appeal is prosecuted by Leo Drollinger and Ben Drollinger.

In the bill Gr. L. Drollinger states that the suit is brought on behalf of himself and his brother and partner, Ben Drollinger, doing business under the firm name of Gr. W. Drollinger & Sons, and alleges that they entered into the contract with the defendant upon which the claim for lien is based.

The motion was denied and for the same reasons this point (supported by the same arguments as the motion) cannot be allowed.

The bill was filed March 6, 1928. It alleges in'substance that on or about January 20, 1927, complainants entered into a contract with the defendant, Erwin E. Cowen, for the construction of a building on certain real estate in Chicago, Illinois, specifically described, which building was to contain thirty-six 3-room kitchenette apartments, six 2-room kitchenette apartments, seven 4-room apartments and 6 shops, according to a certain written contract which is attached to the bill; that at the time of making the contract the legal title was in Erwin E. Cowen; that the complainants erected said building in compliance with the contract, furnishing all the necessary labor and material, and complied with the provisions of the contract in every respect except that whereas the contract provided the building should be completed by September 1, 1927, the same was not completed until later because of the actions of Erwin E. Cowen, and that this part of the contract was waived; that on October 28, 1927, Erwin E. Cowen accepted and went into possession of the building which he later transferred to Edward E. Cowen, who in turn transferred it to Clara Vaughan, on or about December 8, 1927.

It is also alleged that the contract price of the building was $202,200; that there was a stipulation to take up the first mortgage which was then on the vacant property; that complainants paid the sum of $186, being the credit on six months’ interest from the bank which made the first mortgage; that complainants have received the total sum of $185,916, leaving a balance due them of $36,576, which Erwin E. Cowen agreed to pay with interest on October 28, 1927, and for which amount complainants are entitled to a lien; “that they filed their notice of claim for lien for said aforementioned amount of $36,576 within the statutory time in the Circuit Court of Cook County, in such cases made and provided. ”

The agreement attached to the bill states:

“It is also understood and agreed by and between the parties hereto that said price of two hundred two thousand and two hundred ($202,200) dollars shall (include the payment of interest on the first mortgage for a period of six months from date of signing thereof; and shall also include all recording fees which may be necessary to complete said mortgage; also guaranty policy bill, and shall also include fire insurance for five years, sufficient to cover first mortgage, surveying and plan, and shall also include printing bonds, certifying the same and the regular rate of commission for making of said first mortgage).”

The trial court was apparently of the opinion that this contract was an entire one for a single contract price; that since it included both lienable and nonlienable items, no claim for lien could be allowed, and for that reason sustained the general demurrer and dismissed the bill upon the authority of Cronin v. Tatge, 281 Ill. 336.

The sole question in that case was whether the lien law authorized a lien on adjacent property for work done in the way of paving, laying gas and water mains and sewer connections which were not connected with the lot upon which the lien was asked. It was held that such lien could, not be allowed. It also appeared that the contract covered the cost of a sidewalk which was adjacent to the lot in question; that the contract was an entire one for all thé work at one price, and it was therefore impossible to separate the lienable from the nonlienable items. It was held no lien could be allowed for any of the items. The record there disclosed a hearing upon the merits, not, as here, a decision of the court upon a demurrer to the bill.

In the latter case of Mutual Const. Co. v. Baker, 237 Ill. App. 596, the third division of this court held (the evidence in the record being such as to make it possible to determine that the nonlienable items amounted to less than the amounts which had been paid upon the contract) that the complainant was entitled to a lien for the balance due, applying the general equitable principle that equity will credit payments so as to give a creditor the best security for the debt remaining unpaid. (Monson v. Meyer, 190 Ill. 105; Barbee v. Morris, 221 Ill. 382.) The court there held that Cronin v. Tatge, 281 Ill. 336, was not inconsistent with such construction. A petition for certiorari was later filed in the Supreme Court but denied, thus making this opinion final.

We think it appears from the facts of the bill here that the lienable items can be separated from the nonlienable ones and that Cronin v. Tatge, supra, is therefore not applicable.

The defendants also seek to sustain the ruling of the court upon the demurrer by pointing out that it was necessary for the complainant to show in his bill that he had within four months after the date, of the completion of the work filed a sufficient claim for lien duly verified in the office of the clerk of the circuit court, since it appears that suit was not instituted within the 4-month period. Section 7 of the Mechanics’ Liens Law, Cahill’s St. ch., 82, fí 7, seems to require that a proper claim for lien should be filed in the office of the clerk of the circuit court or suit begun within four months. We have above set forth the averments of the bill in this respect. It alleges that the claim for lien was filed in the circuit court, not in the office of the clerk of the court. It does not specifically allege that the claim for lien was verified by affidavit or that.it contained a correct description of the lot or lots of land, although these facts may be inferred from the allegation that the claim was filed as required by the statute.

If a special demurrer had been interposed pointing out the defects in the bill in this respect, we have no doubt it would have been properly sustained. A general demurrer, however, was not sufficient. McEvoy v. Court of Honor, 163 Ill. App. 556; People ex rel. McGraham v. Armstrong, 196 Ill. App. 199.

For the reasons indicated the decree is reversed and the cause remanded with directions to overrule the demurrer.

Reversed and remanded with directions.

O’Connór, P. J., and McSurely, J., concur.


source: Caselaw Access Project

author: Mr. Justice Matchett

license: Public Domain

text:
    Elizabeth Dobal, Appellee, v. Guardian Finance Corporation et al., Trustees of a Trust Estate, Trading as Home Builders Investment Trust, Appellants.
    Gen. No. 33,017.

      Heard in the first division of this court for the first district at the October term, 1928.
    Opinion filed January 21, 1929.
    Rehearing denied February 4, 1929.
    Arthur H. Jones, for appellants.
    E. E. Hartigan, for appellee.
   Mr. Justice Matchett

delivered the opinion of the court.

Plaintiff sued defendants for the aggregate amount of sums of money paid by her to them according to the terms of a certain writing. She averred that the transaction was void under sections 2-9 of the Illinois Securities Law (see Cahill’s St. ch. 32, THT 255-262; SmithHurd’s Eev. St. 1923, ch. 121%, p. 1866). She also claimed attorney’s fees as provided by that act. Defendants filed an affidavit of merits.

There was a trial by jury, and at the close of all the evidence the court instructed the jury to return a verdict in favor of plaintiff and assess her damages at the sum of $1,475. Judgment was entered on this verdict after motions for a new trial and in arrest had been overruled.

Defendants recite 19 alleged errors, upon which they rely, and present a “brief” containing 31 alleged errors, followed by an argument of 7 pages, in which the larger number of these points (not being discussed) are waived under rule 19 of this court. As a matter of fact the controlling questions in the case are only-two: (1) Whether the court erred in instructing the verdict; (2) whether it erred in excluding evidence offered by defendants.

There is no dispute as to the facts. On December 6, 1923, plaintiff, whose name at that time was Elizabeth Dobal, paid to a Mr. Boss, representing" the Guardian Finance Corporation, the sum of $625 in cash and received a duplicate of a document which appears in evidence. It is of a yellow color and in printed form, indicating a usual course of business on the part of defendants. At the top appears the following in print: “Notice: Payments made herein are not for deposit and cannot be withdrawn. This contract is as herein set out, and agents have no authority to alter or amend this application or to bind any of the parties hereto by any statement not made herein. ’ ’

Immediately below this notice and in much larger print appears the following statement, evidently intended to indicate the nature of the transaction:

“Original Application for the Purchase of Junior Mortgage Bonds.”
Beneath this statement appears the following:
‘ ‘ To the Guardian Finance Corporation,
64 W. Bandolph Street, Chicago, Illinois.
“App. rec’d.......12/8 L. S. Made...........
Book No........20447 Made ...............
Given to............. Date.................
“I hereby make application for the purchasé of Five Thousand Dollars ($5,000) of the par value of bonds belonging to the Trustees-of the Home Builders Investment Trust, which said bonds are to be Six Per Cent (6%) 'Gold Bonds secured by Junior Mortgage or Trust Deed, upon specifically described real estate in the State of Illinois.
“I hereby agree to purchase at once Six Hundred Twenty-five Dollars ($625) of said bonds, which amount is paid herewith, and I agree to purchase and pay for Fifty or more Dollars ($50) of the par value of said bonds on the 15th day of each month hereafter until said entire amount of bonds applied for herein have been by me purchased, and I further agree to assign all such bonds as purchased to the said trustees as collateral security for the punctual performance of all the covenants of this application.
“It is agreed that this document shall be construed to be an application for the purchase of bonds and shall never be construed by the parties hereto or by any court as an investment contract.
“Dated at Chicago, Ill. . . . this the 6th day of December, A. D. 1923.”

In appropriate blanks below appear the signature of plaintiff, her address, telephone number, occupation, and the name of the salesman. The words “Accepted by” are followed by a blank which is not filled in.

At the time of signing this paper plaintiff paid $625 and received a book which is designated on its back as “Receipt Book No. 20447 Guardian Trust Companies 64 W. Randolph St., Chicago, U. S. A. Property of,” and in the blank underneath is the name of plaintiff. Upon a page within is pasted a printed paper upon which appears the following:

“The Guardian Finance Corporation accepts the payments endorsed by authorized persons in the Receipt Book, as Fiscal Agent for and for the account of the Trustees of the Home Builders Investment Trust according to the terms and conditions of Application No. 20447, dated Dec. 6th, 1923, and identified by the signature of the owner hereof, for the purchase of Junior Mortgage Real Estate Gold Bonds.
Guardian Finance Corporation 11th Floor
64 West Randolph St. Chicago, III.”

On the pages of this book appear the number of the book, the name of the plaintiff, her address, “Face of bond $5,000.00 Entrance Fee $625.00' Monthly paym’ts $50.00.” In appropriate columns on each page of the book are blanks in which it was evidently intended to be written the day of the month, the initials of the collector and the amount of payments as made by plaintiff from time to time, and it appears therefrom that plaintiff continued to make payments until January 5, 1926, at which time she paid $25, making a total sum of $1,175 paid by her.

Notwithstanding the statement which appears in this application to the effect that it shall not be construed to be an investment contract, and notwithstanding its provisions are so unique as to make a definition of its character somewhat difficult, we are disposed to hold, construing these two documents together and considering the nature of the transactions from time to time, that the whole transaction must be construed, to be a contract of an investment nature and therefore subject to the provisions of the Illinois Securities Law, Ca-hill’s St. ch. 32, f[ 254 et seq. Although this contract was signed by only one of the parties, namely, the plaintiff, it was held and acted on by the defendants in that from time to time they received and accepted plaintiff’s money thereunder and they would therefore be bound thereby (Ziehme v. McInerney, 167 Ill. App. 577; Hoyt v. Schillo Motor Sales Co., 185 Ill. App. 628). The agreement was in the nature of an investment contract and subject to the provisions of the Illinois Securities Act, unless excepted therefrom by the provisions of that act. Further, according to the provisions of paragraph 2 of section 37 of that act, Cahill’s St. ch. 32, ff 290, subd. 2, the burden of proof is put upon the seller or issuer to establish exemption from the act if exemption is claimed.

In this cáse the defendant contends that this contract was one for the sale of junior real estate bonds and was therefore a Class A security, which, under section 4, Cahill’s St. ch. 32, if 257, is expressly exempted from the provisions of the act. Section 3 of the Securities Act, Cahill’s St. ch. 32, 256, provides that Class A securities shall be such that the inherent qualities thereof assure the sale of the same without the perpetration of fraud. We find no description of any such securities in this contract. Under its terms the securities sold might be secured upon any piece of land of any amount with any number of prior liens for any amount against it, provided that the real estate was specifically described and situated in the State of Illinois. Indeed, the agreement discloses no specific promise on the part of defendants to deliver any bond of any kind or character. This contract on its face is absolutely worthless, and if the intention was to separate the plaintiff from her money without giving any valid consideration therefor, it seems to have been well designed for that purpose. It was not a Class A security and is not exempt from the provisions of the Securities Act as such. On the contrary, it represents precisely the kind of transaction against which the Securities Act was intended to give protection.

Defendants offered testimony tending to show that certain real estate bonds were turned over by the Guardian Finance Corporation to the trustees of the Home Builders Investment Trust for the plaintiff. It does not appear, nor was there any offer to show, that plaintiff was ever notified of such fact or that she ever assented thereto. An employee of the Home Builders Investment Trust testified that he had certain bonds in his possession which he produced and which have printed thereon the statement that the same were “junior mortgage bonds.” He testified that these bonds were set aside and kept in a vault in anticipation of the completion of plaintiff’s payments. Plaintiff testified (and her evidence is not contradicted) that she was never notified of any such allotment and never assented thereto.

Defendants offered oral evidence as to the condition of the title of the real estate conveyed to secure these bonds. This evidence was properly excluded. 10 R. C. L. 905, 57; Kirkpatrick v. Clark, 132 Ill. 342. Moreover, for the reasons already stated, no proper foundation was laid for the introduction of this evidence.

Plaintiff’s right of property was in her investment contract and not in the bonds. The contract is void under the provisions of the Securities Act and is on its face a palpable fraud which would justify a judgment for the return of the money paid under its terms irrespective of the Securities Act.

The judgment is affirmed.

Affirmed. '

O’Connor, P. J., and McSurely, J., concur.


text:
    Nellie Mondt, Administratrix of the Estate of Gerald Mondt, Deceased, Appellant, v. Charles Ehrenwerth, Appellee.
    Gen. No. 33,118.

      Heard in the first division of this court for the first district at the October term, 1928.
    Opinion filed January 21, 1929.
    Hermann P. Haase, for appellant.
    Louis A. Heile, for appellee; Carl W. R. Wermine, of counsel.
   Mr. Justice Matchett

delivered the opinion of the court.

This is an action on the case for alleged negligence causing the death of plaintiff’s intestate, a boy. five years of age.

At the close of plaintiff’s evidence, the court instructed the jury to return a verdict for defendant, and from the judgment entered on this verdict the plaintiff has appealed. The controlling question in the case is whether the court erred in directing the verdict.

The declaration is in three counts, the first of which is based on the statute, the second on general negligence, and the third on the theory of an attractive nuisance.

The accident in which the intestate lost his life occurred on June 23, 1925.. There is no conflict in the evidence upon any material fact. The proof tends to show that at the time alleged the defendant Ehrenwerth conducted a paint and hardware store in the City of Chicago, wherein with other articles he was accustomed to sell benzine and turpentine. His daughter acted as his assistant and was in charge of the store on this particular day and by defendant authorized to sell benzine. He had conducted the 'store for three years.

William Vavernetz was a boy who lived in the neighborhood and was at this time between 13 and 14 years of age. He attended St. Mercier School with other children Of his age and in June, 1925, passed examinations with an average of 84. He had known defendant’s store for a long time and had been sent there many times by his parents to purchase benzine. On this particular day his mother told him to get benzine for the purpose of cleaning some paint brushes. He took with him an empty paint can which he had used for the same purpose on other occasions, went to defendant’s store and told Carrie Ehrenwerth, who was in charge, that his mother had sent him to get some benzine and that she wanted to clean some paint brushes. He does not remember whether or not the can was corked. On each prior occasion when he had purchased benzine (sometimes from the defendant himself), he had been sent there by his father or mother and in every case took the benzine right home and neyer set fire to it. The can was a gallon varnish can with a piece of yellow paper on it containing something written on the paper. Carrie Ehrenwerth gave him the benzine in this can and he paid her 10 cents for it. He does not remember that Carrie wrote anything on the can. Taking the benzine with him, on his way home he met a neighbor boy, named Peter Zinko. William asked Peter if he wanted to see a stone burn, and Peter said, “Yes.” William poured some benzine on the stone and lighted it, and it started to burn. Peter wanted to see it burn higher, so William put the can almost into the fire and the can exploded.

Gerald Mondt, the deceased, was a boy five years and seven months of age. On the morning of this day he was playing with his brother Harold, then three years of age, in a lot next to his home. Harold climbed over the fence and Gerald went into the house and told his mother that Harold had left the yard. The mother went through the house and out of the front door and Gerald followed her. She noticed William and Peter standing by a willow tree in the front of the next lot where the children were accustomed to play. Harold was then playing with other children three lots away. He called, “Mama,” and the mother answered, “It is you I am after.” The mother turned and heard a scream from Gerald. . She rushed to him and found him on fire. He was badly burned and was taken to the hospital where he died about four o’clock on that day as a result of the burns which he received at that time, from this flaming benzine.

There is of course no doubt as to the rule of law which must be applied in determining the question of whether the court erred in -instructing the jury to return a verdict for the defendant. If there is any evidence considered in the light most favorable to the plaintiff under which on any count a jury could reasonably return a verdict in favor of the plaintiff, it is error to give such an instruction.

The plaintiff contends that upon any one of the three counts of this declaration there was sufficient evidence to go to the jury. The statute set forth in the first count is paragraph 326-351 of chapter 38 of the Illinois Revised Statutes (see Cahill’s St. ch. 38, If 326; Smith-Hurd, 1927, p. 971), approved June 28, 1919, and is entitled “An Act to regulate the storage, transportation, sale and use of gasoline and other volatile oils.” The first section thereof provides:

“That it shall be unlawful for any person, firm, association or corporation to keep, store, transport, sell or use any crude petroleum, benzine, benzel, gasoline, naptha, ether or other like volatile combustibles, or other compounds, in such manner or under such circumstances as will jeopardize life or property.”

The second section of the act, Cahill’s St. ch. 38, 327, gives to the Department of Trade and Commerce power to make and adopt reasonable rules and regulations concerning the transportation, sale and use of such oils except in cities or villages where regulatory ordinances upon the subject are in full force and effect. The third section, Cahill’s St. ch. 38, ft 328, provides penalties for the violation of any of the provisions of the act.

Insofar as the briefs disclose this statute has never been construed by the courts of this State. However, we do not hesitate to hold that the facts disclosed by the evidence fail to show that this particular sale was made under such circumstances as would jeopardize life or property within the meaning of this statute. It is suggested that the sale of an article such as benzine to a boy 13 years old -is such a circumstance, but the evidence indicates that the boy was authorized to purchase the benzine by his mother; that he had purchased the same article theretofore, and, moreover, the evidence affirmatively shows that he knew the character and qualities of the article. It is suggested that he should have been warned of the dangerous character of the article sold. The reply to this suggestion is that a warning would not have added anything to his knowledge. It is suggested that a stopper or a cork that could not be easily removed by the boy should have been put in the can, but there is no evidence to indicate that the girl who sold the benzine could have put in any stopper or cork which the boy would not have been able to remove had he wished to do so. We hold that the statute was not applicable to the transaction in question and that the evidence does not disclose a violation of its provisions.

It is also urged that the case should have gone to the jury under the third count which was drawn upon the theory of an attractive nuisance, but this contention cannot be seriously entertained. The doctrine of attractive nuisance was first announced in the “turntable cases” so called (Sioux City & P. R. Co. v. Stout, 17 Wall. [U. S.] 657), and has been developed in an attempt to define the social duties of owners of land towards children entering upon premises without permission by which under ordinary circumstances they would become trespassers, thus precluding recovery for injuries sustained by reason of the negligence of the landowner. In general it has been held that where an injury results from some dangerous element, a part of or inseparably connected with an alluring thing which exists with the landowner’s permission upon the land, the law will presume that the maintaining of such attractive device or allurement is an invitation to the child by the landlord, in which case when injury occurs he may not successfully defend upon the theory that the child injured is a trespasser. Holmberg v. City of Chicago, 244 Ill. App. 505; Flis v. City of Chicago, 247 Ill. App. 128; Burns v. City of Chicago, 248 Ill. App. 204, are some cases which seem to hold that the doctrine, is not limited to owners and occupants of land. Obviously, that doctrine has no application to the facts of this case. Anderson v. Karstens, 218 Ill. App. 285, and cases there cited.

It remains to consider whether there are any facts under the second count which charged general negligence that should have been submitted to the jury. The question of the liability in tort of vendors, contractors and manufacturers to third parties who have no contractual relationship to them was considered by this court in Davidson v. Montgomery Ward & Co., 171 Ill. App. 355, a case which has been recently followed in Miller v. Sears, Roebuck & Co., 250 Ill. App. 340. It was there in substance held that in general there is no liability, but to this general rule there are exceptions: (1) Where the act of negligence is with reference to some article imminently dangerous to the life or health of human kind; (2) where an owner’s act of negligence causes an injury to one invited upon the owner’s premises; (3) where one sells an article imminently dangerous to life and limb without giving notice of its qualities; (4) where false representations, express or implied, have been made as to the quality of the thing manufactured or sold. We have already stated our holding that benzine in the small quantity here sold cannot be considered an imminently dangerous article. A jury could not on the evidence in this record reasonably find that it was imminently dangerous. It could not therefore reasonably find any duty to disclose such quality and it is not claimed that there was any false representation express or implied. Benzine in this small quantity was no more dangerous than many other articles for which parents send children to the neighboring store.

No expert evidence was submitted, nor perhaps was any necessary, to show the difference between the quality and character of the benzine and nitroglycerin, which was the article causing the injury in one of the cases plaintiff cites. Bunyan v. American Glycerin Co., 230 Ill. App. 351.

We are constrained to hold that under no theory which has been suggested could a jury reasonably have found any negligence on the part of defendant in connection with this transaction. To hold a defendant liable for injuries sustained by third persons under circumstances such as appear here would be to render retail trade and business of vendors extremely hazardous and to place upon them a burden greater than could be borne.

We are, moreover, compelled to affirm this judgment, because, even assuming negligence under any of the different counts to have been established, it conclusively appears upon this record that such negligence was not the proximate cause of the injury to plaintiff’s intestate. Hartnett v. Boston Store of Chicago, 265 Ill. 331, is conclusive upon this proposition, and it is unnecessary to repeat here what is stated in that case by the Supreme Court. Assuming negligence the injury here was not the natural and probable result of the assumed negligent act or omission, but on the contrary was proximately caused by a subsequent, independent act of another. At most, it can only be said that the sale of the benzine created a condition which made the injury to the intestate possible. This is not sufficient to establish liability.

We hold that the sale of the benzine in this case was not the proximate cause of this most regrettable death.

The judgment of the trial court will be affirmed.

Affirmed.

O’Connor, P. J., and McSurely, J., concur.


author: Mr. Presiding Justice Holdom

text:
    C. T. Willard and F. C. Willard, Appellees, v. Fred C. Bristol and Cedric H. Smith, Trading as Fred C. Bristol & Company, Appellants.
    Gen. No. 32,701.

      Heard in. the third division of this court for the first district at the April term, 1928.
    Opinion filed January 30, 1929.
    Frisch & Frisch, for appellants; Theodore J. Ticktin, of counsel.
    Knapp & Campbell, for appellees; John Howard Hershberger and Richard C. Stevenson, of counsel.
   Mr. Presiding Justice Holdom

delivered the opinion of the court.

Plaintiffs brought suit in assumpsit as the indorsees and holders in due course before maturity and without notice of any defenses of a certain promissory note, dated March 23,1926, made by the defendants as partners under the firm name of Fred C. Bristol & Company, payable 30 days after its date at Chicago Trust Company, Chicago, for the sum of $4,000, to the order of Lind Bealty Company, Inc. The Lind Bealty Company indorsed the note and delivered it to plaintiffs as follows: “Lind Bealty Co., Inc., Samuel Bachner, Pres., John Schwartz, Sec., Samuel Bachner, J. Schwartz.”

The cause went to trial on a declaration of two counts in due form declaring upon the note, and there was filed therewith an affidavit of claim stating the amount due upon the note at that time to be $4,003.54, the $3.54 being protest fees, the note not drawing interest from its date. To this declaration defendants pleaded first the general issue, and secondly special plea of payment, and a plea that the defendant Bristol was not connected with the Bristol firm. Beplications to these pleas were duly filed.

Defendant Cedric H. Smith on January 21, 1928, filed an additional plea denying that he executed the note sued upon. On January 23, 1928, the case being called for trial, counsel for defendants asked leave to file an additional plea denying the negotiation of the note in suit. This motion was denied.

The cause proceeded to trial before the court and jury. At the conclusion of the plaintiffs’ case defendants moved for an instructed' verdict in their favor, which was denied. At the conclusion of all the evidence the plaintiffs moved for an instructed verdict in their favor, which was allowed, and the jury were instructed to return a verdict assessing plaintiffs’ damages at the sum of $4,353.54, and such verdict was returned accordingly. Defendants made motions for a new trial and in arrest of judgment, which were both denied, to which they excepted. The court thereupon entered judgment upon the verdict for the amount thereof, and defendants bring the record here for review by appeal.

Defendants assign for error and argue for reversal the refusal of the trial court to allow the filing of the proffered additional plea on the morning of the trial; and in refusing to allow 1 ‘ admissions against interest, both oral and written, made by the Lind Realty Co., plaintiffs ’ assignor, at the time it was the holder of the note” in suit; and in allowing the note in suit to be received in evidence over defendants.’ objection, without first requiring proof of its execution and assignment, and denying defendants’ motion for an instructed verdict in their favor, and in granting the motion of plaintiffs at the close of the case for an instructed verdict in their favor.

In the trial of the cause defendants’ counsel admitted that Cedric H. Smith and Fred C. Bristol were partners as Bristol & Company, and the plea of the defendant Smith that he was not a partner was waived; and it was likewise admitted that the notes signed Fred C. Bristol & Company (one of which is the note in suit) are the notes of Bristol & Company. We shall therefore pay no further heed to the arguments of defendants’ counsel in attempting to negative these facts.

There was no error in the trial court’s refusal to allow defendants to file additional pleas after the case was called for trial. That motion came too late because defendants, while having plenty of time in which to interpose such a plea, failed to avail of that privilege. Plaintiffs had procured the attendance of two witnesses from New York, and were ready for trial upon the issues which had remained in the case for a long time; and furthermore there was no affidavit tendered in support of the motion, assigning any reason why the application was not made at an earlier date. Such motion is addressed to the sound discretion of the court, and such'ruling will not be disturbed, unless this court is able to say from the record that the court abused its discretion in denying such motion. Substantive rights may be lost by inexcusable delay. The law rewards the diligent, not the laggard. In the face of the fact that defendants had no excuse for failing to file the proffered plea before the day of the trial, and that all the representatives of Lind Realty Company were in New York and not available at the time of the trial in Chicago, and that the plaintiff was ready for trial with two witnesses on hand from New York, we think such conditions show the exercise of sound discretion by the trial court in denying the motion. While it is true defendants were willing to consent to a continuance of the case, undoubtedly indefinitely, it would not have been justice to plaintiffs, who were ready for trial with two witnesses from New York, with no intimation that a postponement would be requested on a motion to file an additional plea, to have granted such motion. If such motion had been granted, plaintiffs would have been compelled to stand the expense of the attendance of the two witnesses from New York, which, if a continuance was proper, could not have been taxed as costs. Furthermore defendants were in no position to demand such leave. There was no affidavit setting forth any reason why the application to file such additional plea had not been made in apt time, or why the application had been postponed to the hearing. Page v. W. F. Hallam & Co., 212 Ill. App. 462: Dow v. Blake, 148 Ill. 76.

In City of Chicago v. Cook, 204 Ill. 373, the court said:

“A defendant who presents such an application after the cause has gone to trial, in order to entitle the application to the favorable consideration of the court, should support the motion by showing some reasonable excuse for not having presented the defense before the calling of the cause for trial.”

The evidence of defendants was properly disregarded by the court as defenses, so that when such evidence was ruled out of the case, no evidence remained to support the defense or to rebut the evidence of plaintiffs. The pleadings of defendants presented no issue for trial. 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, ft 55. The note was properly indorsed by the Lind Realty Company, by its president and secretary, plaintiffs ’ proof of this question not being disputed by any evidence proffered on the part of defendants. Furthermore the claims of defendants are inconsistent on this proposition, for they sought to avoid payment of the note in suit on the ground that they had before maturity paid the same to the Lind Realty Company without taking a surrender of the note, when, as a matter of fact, the evidence shows that at the time when the defendants claim to have paid the note to the Lind Realty Company, the note was in the possession of plaintiffs.

Moreover the uncontradicted evidence of plaintiffs proved that plaintiffs were the holders of the note in suit in due course, and that under the law they held such note free from any defects in the title of prior parties, and from defenses available to prior parties among themselves except the defenses of fraud in the execution of the instrument or that the instrument was given in a gambling transaction. No attempt was made by defendants to prove any such defects. Cahill’s St. ch. 98, if 77; Sherman State Bank v. Smith, 244 Ill. App. 171. It is the law that payment of a note by the maker to the payee is no defense in an action against the maker by a holder in due course who received the note by indorsement from the payee. If the defendants did pay, as they claim, the note in suit to the Lind Realty Company before maturity, and while the note was in the possession of plaintiffs, and without procuring a surrender of the same, defendants made such payment at their own risk. Such conduct between the payee and the maker of the note does not affect the title of a bona fide holder in due course under the Negotiable Instruments Act, Cahill’s St. ch. 98. Defendants can only avail of the payment of the note to the maker by proof that defendants paid the note to the payee, Lind Realty Company, before plaintiffs received the note from the Lind Realty Company. There was neither evidence nor available pleading to that purport. The evidence uncontradictedly shows that plaintiffs were holders in due course from the payee, Lind Realty Company, and that the note was taken from defendants and received by plaintiffs as a payment of $4,000 on an indebtedness owing by the Lind Realty Company to the plaintiffs in excess of $7,000. The evidence in the record sustains the contention of plaintiffs that the note was complete and regular upon its face, and that they became holders of it before maturity without notice of previous dishonor; that it was taken in good faith and for value, and that at the time the note was received by plaintiffs from defendants, they had no notice of any claimed infirmity in the instrument, nor defect in the title of the payee, Lind Eealty Company. This proof furnished every essential requirement of chapter 98, paragraph 72 of the Negotiable Instruments Act, Cahill’s St. ch. 98, Ü 77, making the plaintiffs owners of the note in due course.

The court did not err in directing the verdict and a search of the record fails to disclose any errors of procedure or in the court’s directing a verdict for plaintiffs, as it did. Therefore the judgment of the superior court is affirmed.

Affirmed.

Wilson and Eyneb, JJ., concur.


text:
    Joseph Harris, Appellee, v. Chicago Title and Trust Company, Administrator with the Will Annexed of the Estate of John B. Russell, Deceased, et al., Appellants.
    Gen. No. 32,736.

      Heard in the third division of this court for the first district at the June term, 1928.
    Opinion filed January 30, 1929.
    Cooke, Sullivan & Hicks and Alden, Latham & Young, for Chicago Title & Trust Company, appellant.
    Chapman & Cutler, for Harris Trust & Savings Bank, appellant.
    Charles Martin, for Addressing Machines Securities Company, appellant.
    Townley, Wild, Campbell & Clark, for appellee; Morris Townley, of counsel.
   Mr. Presiding Justice Holdom

delivered the opinion of the court.

This case has been consolidated with Gren. Nos. 32,734 and 32,735 for hearing on the same record. There are three appeals perfected by each one^of the three defendants from the same decree. While each defendant has filed briefs in support of its appeal, the whole case made by the decree, against all defendants, will be disposed of in this opinion and stand as the opinion of the court in all three appeals.

The case went to a final hearing upon the amended bill and the so-called second amended supplemental bill. The defendant, Chicago, Title and Trust Company, as administrator with the will annexed of the estate of John B. Bussell, deceased, filed its answer to the amended and second amended supplemental bill. Defendant, Addressing Machines Securities Company, filed its answer to the second amended supplemental bill, and the defendant, Harris Trust & Savings Bank, filed a general demurrer to the same. The demurrer of the bank was overruled, and the bank electing to stand by its demurrer, the decree in the record was entered against the defendant bank (as confessed), as well as the other two defendants.

The theory of the bill is to enforce a constructive trust alleged to arise from the breach of a confidential relationship between complainant Harris and the deceased John B. Bussell. Certain preliminary agreements are referred to in virtue of which Harris and Bussell, it is claimed, entered into a joint adventure to purchase and sell at a profit certain shares of the predecessor of Addressing Machines Securities Company, the Addressograph Company. It is contended that these agreements attest the existence of a joint adventure. It is set out in the bill that a joint adventure having been entered upon and a confidential relationship established between Bussell and Harris, Bussell’s subsequent conduct in attempting to eliminate Harris from the adventure constituted a breach of the obligations imposed upon him by such confidential relationship.

It is further alleged in the bill that Bussell acquired his knowledge of the Addressograph Company shares, including their value and Duncan’s willingness to sell, in virtue of a relationship of trust and confidence which existed between Harris and Bussell; that such relationship was that of partners or joint adventurers, which in equity is a confidential relationship, and that by reason thereof Bussell was disqualified on equitable principles from using the information thus acquired at any time for his own benefit and to complainant’s detriment, and that the bill by its averments sought to declare and enforce against John B. Bussell a constructive trust, growing out of the alleged breach of such confidential relationship.

The answer of Bussell filed in his life time is in substance the same as that filed by his administrator in Cook county, which denied that Bussell had ever entered upon a joint adventure or any relation with Harris, and further denied that there was at any time a confidential relationship between himself and Harris, and contended that there was no joint adventure and no confidential relationship between them, and that he was therefore justified in buying the stock from Duncan for his own account without reference to Harris.

It is contended by the Harris Trust & Savings Bank and the Addressing Machines Securities Company that John B. Bussell at the time of his death was a resident of Pennsylvania; that his will was duly probated in Pennsylvania, and his two sons appointed his executors; that the will was also admitted to probate by the probate court of Cook county, Illinois, and the Chicago Title and Trust Company appointed administrator with the will annexed; that the defendant, Addressing Machines Securities Company, is a corporation existing in virtue of the laws of the State of Delaware, as a holding company; that the final trial of the case was had after the death of Bussell upon the pleadings above recited; that the Illinois administrator of Bussell, as well as the Harris Trust & Savings Bank, contends that the legal situs of the stock of the Addressing Machines Securities Company is not in Illinois, and that the trial court had no jurisdiction over such stock in this suit, and that its decree in this regard is a nullity, as it had no power to enforce the same.

The three parties defendant will be respectively referred to in this opinion hereafter as the administrator, the bank and the securities company.

The administrator assigns error and argues for reversal:

1. That the stock of the securities company not being in Illinois, the title thereto is not in the administrator ;

2. That the Pennsylvania executors cannot be made parties defendant by estoppel or otherwise;

3. That the amended bill does not set forth a case entitling complainant to relief;

4. That the evidence does not establish the joint adventure with Bussell and complainant;

5. That complainant’s witnesses Brush Ellis, complainant, himself, his son Sanford Harris and Gertrude H. Strain, were disqualified to testify by reason of their interest in the subject matter of the litigation.

The bank and the securities company urge for reversal that the situs of the 7,500 shares of the securities company stock is not in Illinois, but in Pennsylvania, and that the securities company is a corporation under the laws of the State of Delaware as a holding company.

The opinion of the chancellor in rendering his decision and in directing the entry of the decree is found in the record. While that opinion has no place in the record, as it is neither evidence of fact nor law, we have given the same our careful consideration.

The competency of the complainant, his son Sanford Harris and the witness Gertrude H. Strain are chailenged as being within the inhibition of paragraph 2, chapter 51, Cahill’s 1927 Illinois Rev. St., which reads:

“No party to any civil action, suit or proceeding, or person directly interested in the event thereof, shall be allowed to testify therein of his own motion, or in his own behalf . . . when any adverse party sues or defends ... as the executor, administrator, heir, legatee or devisee of any deceased person, or as guardian or trustee of any such heir, legatee' or devisee, unless when called as a witness by such adverse party so suing or defending. . . .”

We think it clear that the complainant Joseph Harris comes within the inhibition of this statute, and that he was clearly incompetent to testify as against the administra,tor of John B. Russell. It is also clear from the testimony of Sanford Harris, notwithstanding his equivocations and evasions, that he was interested with his father, the complainant, in the subject matter of the litigation, about which he testified at length. So was the witness, Gertrude H. Strain, the confidential secretary to Joseph Harris, who admitted that she had a five per cent interest in the event that the suit was decided in favor of complainant. We therefore hold that the evidence of Harris, his son, and Gertrude H. Strain was improperly received, and will not be considered as evidence by this court in its decision of the case.

The leading witness for complainant, Brush Ellis, was secretary to John B. Russell for nearly five years, and all the facts to which he testified were obtained by reason of that confidential relationship that existed between Ellis and Russell and it is very doubtful, to say the least, whether such testimony would be admissiblej as the act of Ellis was a betrayal of the confidence which Russell had imposed in him, but be that as it may, a careful examination of all his testimony would in no way tend to establish a joint enterprise or a joint adventure between Harris and Russell.

The evidence of the foregoing witnesses was received against the objection of the defendants.

The interest of complainant started in his obtaining a written option from Joseph S. Duncan for the purchase of 250 shares of the capital stock of the Addressagraph Company for the sum of $2,500,000. The right under the option was to be exercised on or .before August 1, 1923, and the option then provided for the manner of payment. This option was extended to September 15 thereafter. Under this option Harris exerted himself to the best of his ability to comply with its terms, but in this he failed." Thereafter Harris did nothing regarding the matter and the decree of the court proceeds upon the theory of the bill that the option created a joint adventure between the parties and a condition of trust and confidence between them, so that whatever Bussell did thereafter in relation to the stock inured to the benefit of Harris as well as himself.

. Thereafter Bussell in effect acquired the interest in the stock in the Duncan option to Harris. Under the testimony in this case we think it apparent that Harris lost all interest in the subject matter of the option at the expiration date as extended, and' all the parties were free to deal with the subject matter as they might see fit, as no obligation of a trust or confidential nature existed between them. So far as Harris having any agreed interest in the enterprise, he tried to procure from Bussell a writing setting up his interest, the extent of which he made no claim, which Bussell never gave him. Many things were done thereafter which it is unnecessary to recapitulate here.

Among other things it was agreed that there should be an audit of the books of the Addressograph Company, and that was made by- the firm of which Perley Morse, a witness for defendant, was a member. The bill for that audit amounted to $18,000. "While Harris claimed to have a one-fourth interest he neither paid nor offered to pay any part of the audit bill. There were other large items of expense in acquiring the stock which Harris never paid nor offered to pay. Complainant in no way made himself liable to pay any money. Harris never did any act in a financial way which would indicate or lead any one to believe that he had or claimed to have any interest in the stock covered by or growing out of the option. He did nothing as an indicium of any proprietary nature.

In the course of the chancellor’s opinion he made these observations: “In fact, gentlemen, to me this case is so simple that I eliminate from consideration, as you see I do, the testimony of Joseph Harris and am making little reference to the testimony of Sanford Harris. If I had before me only the testimony of Morse, and nothing else, my finding would be that Harris is entitled to recover. I would then possibly be prompted even to hold that it was a trust ex maleficio. Morse’s testimony would have justified such a conclusion, but I don’t think it is necessary in this case. I rather adhere to the first possibility that I have indicated, namely, that without intending- to eliminate Harris, so far as Bussell was concerned, he intended to make a deal with the view of sharing with Harris in the enterprise. It may be that in his mind he never was clear as to what Harris’ share would be, but that does not leave Harris at the mercy of Bussell.”

The chancellor scouted the idea that he was relying upon the testimony of the Harrises in the conclusion to which he arrived, but he admits that he took into consideration the testimony of. Sanford Harris, and as he had overruled the objections made by defendants to the admission of the testimony of the Harrises, which they contend was in the record before him, from which he made his decision, we must assume that he not only admitted that he did take into consideration the testimony of Sanford Harris, but that he also heeded that of the complainant Harris in arriving at his decision.

The testimony of the witness, Perley Morse, whose testimony the chancellor designated as sufficient to entitle complainant to recover, we will examine, bearing in mind that he testified as a witness for defendants. He testified that Russell never talked about Harris paying one-fourth of the audit bill; he never mentioned having an agreement with Harris. After Morse had been testifying for some time the court made these remarks:

“This testimony is incompetent and will be stricken out. Negotiations carried on in conformity with an arrangement with Russell and Harris to further the enterprise are competent, but testimony between other persons in the . absence of complainant, which cannot be said to have been done on his behalf, especially testimony antagonistic to his interests, if any, is hearsay.”

After discussion between counsel the chancellor said he would hear the testimony and if it appeared that the negotiations were carried on in pursuance of the joint enterprise it would remain, and that if it was done with a view to terminating the interest of Harris he would strike it out.

And the.chancellor further said: “I have decided to change my ruling on the offered testimony of Mr. Morse and I am going to let him testify as to the conversation that took place at the hotel and the testimony stricken out will be reinstated.”

Morse further testified that his firm’s bill for the audit was $18,000; that he never knew that Harris claimed he was liable for any part of the bill; that Joseph Harris did nothing towards financing the litigation; that the litigation cost the purchasers about $250,000, including court costs, attorneys’ fees, experts’ fees and everything. Sanford Harris paid no part. The entire expense was borne by Russell, Woods and Morse and the Addressing Machines Securities Company. The individuals contributed money to the Addressing Machines Securities Company, which paid a great many of these liabilities, and was credited to the individuals by the company; that he never knew at any time that Joseph Harris was a coadventurer with him in the enterprise and never heard, before the bill was filed, that he claimed the parties were carrying him for a one-quarter interest. He never made such a claim to him. Harris, the complainant, never paid or offered to pay any interest accruing to Duncan during the litigation. Complainant never transferred to Russell or to the witness any rights he had under the contract with Duncan.

Then the chancellor, interrupting took over the examination of Morse and catechised him for about eight pages of the record.

In answer to questions by the chancellor Morse testified that he first heard of Harris’ option.in August, 1923. Russell brought him some figures regarding the financial condition of the Addressograph Company, and asked him to look over the statement, and he compiled some figures which he gave to Russell. He had known Russell for many years and they had dealings together. Russell told him about this deal, but nothing was said about whether he was to come into it, until the time that the question of this option came up that Russell and he finally obtained, and it was just a verbal understanding that he was to come in with Russell, he to have one-half and Russell one-half, and later Woods-came in and they divided it into thirds. This arrangement was subsequent to his sending his men out to make the audit. His men first came to Chicago on August 16th, and did not return until September 25,1923. He should say Russell and he reached the understanding about September 16 or 17, 1923. The conference with Bussell and the Harrises was about September 14,1923.

The court then asked this question: “Well, at that time, you had already had some talk with Bussell wherein your possible interest would be thus considered? A. Nothing definite.”

Question by the court: “But you had some talk? A. Well, on the general confidence between Bussell and me. It was not discussing at all. Q. It was your understanding that you were acting as much for yourself as for Bussell in the matter although the division wap not agreed upon, is that right? A. Well, I would not say that, because I was not satisfied that we could do anything with this thing, at the time of that conference with Mr. Hall, unless we could get his cooperation. Q. Well, if something was accomplished by Bus-sell from the negotiations, it was understood between you, was it, whether the result of direct conversation or otherwise, that you and Bussell were to go into this jointly in some form or other? A. Why, I had a feeling, Judge, that if I took part in it I was going to have some part in the compensation if there was any, but there was not any definite understanding until, I think, after we got back to New York, or it may have been on the train going back to New York. I think Mr. Bussell went back on the train with me. Q. It was then the terms were discussed whereby you reached some understanding that you were each to have an equal half? A. Yes, somewhere around that time. Q. Was the matter of Harris’ interest at all discussed at that time? A. No more than Mr. Bussell thought, and I thought, that the Harrises were out of it, because Mr. Duncan had shown himself as being-very much opposed to having anything further to do with them.”

At this point Mr. Townley said: “I think the Court ought not to allow him to say what he thought. He should say what he said.”

The court: “Strike out the answer.’’

Question by the court: “I want to know whether Harris’ interests were discussed at all between you at that time. A. Yes, Mr. Bussell said to me he thought that the Harrises were out of it, and I think I said that to him. Q. Did you state why you thought he was out of it? A. Yes, on account of the way Duncan had acted towards them, and little things that he had said, that is what prompted me to go to Mr. Duncan. Q. Well, up to the time of the things that were said or done by Duncan that caused you to believe that he was not satisfied with .Harris, did you believe that Harris had some interest in it? A. Why, I was told by Mr. Bussell that Mr. Harris had an option, though I had never seen it. Q. Was anything told to you by Mr. Bussell, just how Harris, or to what extent Harris contemplated sharing the option with Bussell? A. I can give you my conclusion, I don’t know that it is worth anything.” The court: “I want to know whether anything was said. A. There was nothing said by Mr. Bussell and I don’t know that there was anything said by Mr. Harris, because they had been friends for years.”

Mr. Townley: “I object to what — ”

The court: “That part — I don’t want your conclusions or your guesses. A. They are not guesses. I know both these gentlemen very well. Q. I want to know if anything was said by Bussell to you. A. Begarding any understanding? Q. Begarding any understanding between him and Harris for the division, for the participation of each or either in the benefit of that option, if it were to be exercised. A. Nothing whatever was said.”

At this point the examination of Morse was resumed by Mr. Alden. Morse further stated that it was at the meeting of September 14th that Bussell stated that the Harrises had got him out by false representations as to Hall, after Hall had left the room. Hall said emphatically that he never consented to pooling the stock and after he left Russell told Harmon Harris he had deceived him and that they were out on- a wild goose chase and Harmon Harris said Hall was the one that had deceived him and that Hall did actually, agree to the pooling. Mr. Russell was angry. Hall did not change his attitude after that meeting, etc.

Thereafter Morse testified that the first $250,000 was paid by Russell, Woods and himself, and the next $250,000 was paid by the three of them in June, 1925. Neither Woods, Russell nor himself,, nor the Addressing Machines Securities Company received back any part of the $250,000. The Harrises have not paid anything. Russell never mentioned about Harris having an interest. Russell told Morse he had no agreement 'with Harris whatever, and that Harris had no interest in the proposition, morally or legally. He told him that after Harris brought suit. All he knew was that Harris had an option. He knew Russell got into the matter through Harris. He knew nothing about Sanford Harris ’ negotiations with Duncan, or that Sanford and Harmon Harris were negotiating with Hall. He heard no talk between Russell and Harris about the Addressograph matter. He believed then that Harris had an interest in the enterprise and before his option expired and before Duncan refused to renew the option. He never saw the option himself, and never knew its contents. He didn’t believe that after Duncan refused to renew the option, Harris had any legal or moral right to claim any interest in the option. He understood the option expired September 15th. Russell did not tell Duncan that he was in a joint adventure with Harris to buy the stock, did not say that Harris was interested with him. Russell asked Duncan if he was going to renew the Harris option. Duncan said he would not renew it, and that he did not want to have anything to do with them, and that under no circumstances would he have anything to do with them.

After Duncan said he was through with the Harrises they opened negotiations for an option. “Russell never said a word to me about Harris paying one-fourth of the audit.” The witness never knew that Harris was responsible for any part of the audit. They never asked him to pay. Russell and the witness talked over the proposition and both thought that Harris had reached the end of his rope so far as his option was concerned, and that Duncan would not have anything more to do with him. They considered at that time that the Harrises had lied to them about the entire proposition.

Thereupon the chancellor takes the witness in hand once more, and in answering the interrogatories by the court Morse testified:

Up to the point where he felt that Duncan had be. come disgusted with the Harrises he assumed that they were in on the deal. There was no understanding. Russell and Harris had been friends for years and he had been friends for years with them. About the time they organized the Addressing Machines Securities Company it was necessary to state their interests. They talked about the expenses each one had been to; he had an item of $18,000, Russell had certain expenses which he told about and Woods had certain expenses which he told about, and it was agreed that the expenses should be charged to the proposition and they should receive credit on the books of the securities company. Russell said there was one thing he would like to have; that he was mindful of the fact that the Harrises brought this option to him in the first place, even if they did fall down, and on account of his long friendship and regard for “Pop” Harris he would like to include in his personal expenses about $15,000, and not to exceed $25,000 based on the amount of money made here, because at that time they did not know whether they were going to make any money or not, and Woods, Bussell and he agreed that they would do that. “That is the inside of it and all there is to it, Judge.” Bussell thought the world of Harris. He knew of nothing from which the court could see what was in the minds of the parties as to the extent of the interest the Harrises were to have if the negotiations succeeded, before Duncan had become disgusted. What he has just told you is the first he heard of any interest which Bussell wanted to give to the Harrises, and that was a pure gift on account of friendship. They never considered the Harrises had any real interest at that time. Between September 10th and September 14th, there was nothing said in any way as to the interests of anyone. • At that time they considered the Harrises interested. As to the respective interests that was not thought of.

Then the examination of Morse was resumed by Mr. Alden. Morse further testified: Bussell said he was not obligated to the Harrises, but on account of the long friendship for Harris he would like to make him that present and they consented. That was to be put in as a part of Bussell’s expenses and assumed by the Addressing Machines Securities Company and paid by that company to Bussell.

The foregoing testimony of Morse is recited for the purpose of showing the inconsistency of the conclusion of the chancellor that Morse’s testimony, if nothing else were in the record, was sufficient to sustain the claim and contention of complainant. All of the counsel taking part in the trial before the chancellor were able, experienced trial lawyers, well able, as they did, to take care of every interest of their respective clients. The aid of the court, as counsel, was not sought by either of them. The long and extended cross questioning of the witness Morse, we cannot refrain from concluding, evidenced a strong partisan feeling and attitude on the part of the chancellor. He thereby assumed the role of an advocate, which was hardly judicial.

It is our conclusion that the admissible testimony found in the record is utterly insufficient to support the conclusions to which the chancellor arrived, as evidenced by his opinion and the decree entered in accord therewith.

The res involved in this litigation is 7,500 shares of the stock of the securities company, which Bussell in his lifetime acquired and in which the decree awarded to complainant a one-half interest, being 3,750 shares, subject to the payment of certain expenses incurred by Bussell in the acquisition thereof.

The question now left for our disposition is the jurisdiction of the court to make a decree affecting such shares of stock. The question is one of law arising upon the facts stipulated by the parties into the record. The case had been partially tried in the lifetime of Bussell. After his death the administrator in Cook county was made a party in the place of Bussell, deceased, and complainant filed an amended bill and a second amended supplemental bill upon which pleadings he prosecuted his cause. The securities company filed its answer and the bank demurred, as heretofore stated, and on the overruling of its demurrer elected to stand by its demurrer, and thereupon the bill and the second amended supplemental bill were taken as confessed against it.

By stipulation of the parties dated February 16, 1928, the following facts were agreed upon, subject to the right of objection on the ground of competency and materiality.

That Bussell in his lifetime was indebted to the bank in the sum of $80,000, and on January 13, 1927, executed and delivered his promissory note to the bank for that sum, bearing interest at 5 per cent from date, and at the same time indorsed in blank and deposited with the bank among other things 7,500 shares of the stock of the securities company, which were held as collateral security by the bank; that the interest was paid to September 30, 1927; that the certificates of stock are now held by the bank; that the securities company is a Delaware corporation, licensed to do business in Illinois, maintaining an office in Illinois for the transaction, of its business and its books, including transfer books, ar.e kept in Illinois; that it is a holding company and has transacted no business in Delaware except its organization meeting, and all its business has been transacted in Illinois, except occasional directors’ meetings in New York, and it is not licensed to do business outside of Illinois and Delaware; that Alden, Latham & Young, one of the firm of' solicitors of record for the administrator, prepared and filed for the Pennsylvania executors the petition in the probate court of Cook county, upon which the Illinois administrator was appointed; that subsequently said firm represented the Illinois administrator in the trial of the cause, and that Joseph E. Bussell and John B. Bussell, Jr., mentioned in paragraph 1 of the second amended supplemental bill, were in court during the trial of the cause and rendered such assistance as was required of them; that the petition for letters filed in the probate court, referred to in paragraph 1 of the second amended supplemental bill, alleged that Bussell was a resident of Luzerne county, Pennsylvania, at the time of his death, and the order of the probate court of Cook county found that the last will of Bussell had been duly proven and admitted to probate in Pennsylvania.

It was further stipulated that with respect to paragraph 8 of said second amended supplemental bill, the facts are that subsequently counsel for defendant advised counsel for plaintiff that he would contend that said shares of stock of the securities company had no situs in Illinois, and were not subject to any decree which the Cook county court might make in the cause.

None of the foregoing facts is in dispute.

The question is therefore squarely presented under the undisputed facts, whether the court erred in holding that the situs of the stock of the defendant securities company is in Illinois, so that the title thereto vested in the Illinois administrator, and whether the court erred in decreeing that 3,750 shares of such.stock, subject to certain charges, was the property of complainant. The Pennsylvania executors were not parties to the case at bar, and if they had been parties, they could not have been brought into the jurisdiction of the court. Elting v. First Nat. Bank of Biggsville, 173 Ill. 368.

In Flexner v. Farson, 268 Ill. 435, it was held that every State possesses exclusive jurisdiction and sovereignty over persons and property within its territory, but that no State can exercise direct jurisdiction over persons and property not within its territory.

The dicta of our Supreme Court find support in Brown v. Fletcher’s Estate, 210 U. S. 82.

It is seldom in judicial history that two cases are presented to a court which are so on all fours with each other as this case and Martin v. Central Trust Co., 327 Ill. 622. Every material element in this case was in the Martin case, and this case is controlled by the reasoning in the Martin case. Counsel for Harris have made a very ingenious argument in an effort to differentiate the Martin case from that of their client. While the argument is interesting, it is not persuasive. The Martin case is not one which involved simply the legal fee of the coancillary executor. The whole case rested and was decided upon the question of the situs of the stock which was an asset of the estate and in the possession of Wilton B. Martin, as executor of Samuel K Martin, a resident of New York, and under whose will Wilton B. Martin was appointed executor by the New York surrogate court. That situation is analogous to the one at bar. Russell was a resident of Pennsylvania at the time of his death and domiciled there, and his will was there admitted to probate, and letters testamentary granted to his sons. In the Martin case 225 shares of the preferred stock of the Metropolitan Gas and Electric Company, a Delaware corporation, and 100 shares of the first preferred stock of Union Gas and Electric Company, likewise a Delaware corporation, were involved. In the case at bar 7,500 shares of the securities company stock, a Delaware corporation, are the subject matter of this litigation. The Martin stock was held by the Central Trust Company as collateral security for an indebtedness of the deceased Martin in the sum of $24,000. A like situation is found in the case at bar. Wilton B. Martin, the New York executor, offered to pay the notes providing the trust company would deliver the stock to him. The trust company refused to accept payment on the condition named claiming the property as an asset of the estate in Illinois, and that it should be inventoried as such by the ancillary executors, and remain in the State until the end of the year for administration. Martin, on the other hand, insisted that the legal situs of the stock was New York, where it had been inventoried in the surrogate court. Martin told the trust company that it was his opinion that the collateral should be returned to the New York estate. The questions raised in the Martin case are the samfe in effect as those raised here, as to whether the certificates' for corporate stock owned by the deceased, a nonresident, and pledged to the Central Trust Company as collateral for the notes of the deceased Martin, should have been inventoried as property in this State; and second, whether the plaintiff in error is estopped to raise that question after petitioning for the appointment of a coancillary executor and joining in the filing of the inventory. And the court cites Davis v. Upson, 230 Ill. 327, and Cooper v. Beers, 143 Ill. 25, holding that bonds of a nonresident in this State are nothing more, than debts, and that the property in such bonds followed the person of the owner, and in contemplation of law was situated at the domicile of the owner. Under these decisions the situs of the bonds was in the State where the owner resided. That was the law of this State until 1909, when the legislature amended section 10 of the Wills Act, Cahill’s St. ch. 148, If 10, by adding to that section the following words: “For the purpose of granting administration of both testate and intestate estates, the situs of specialty debts shall be where the instrument happens to be, and of simple contract debts and other choses in action where the debtor resides.” But the court further held that the amendment “was not passed with a view of compelling administration of estates of nonresidents by executors or administrators in cases where the nonresidents owe no debt in this State and where such administration is unnecessary”; and likewise held: “The Central Trust Company had a right to demand administration for the purpose of enforcing the collection of its debt if it was not sufficiently secured and protected by the collateral deposited with it. ’ ’

The court further said: ing Co., 20 Sup. Ct. 559; Holmes v. Camp, 114 N. E. (N. Y.) 841; Baillie v. Columbia Cold Mining Co., 166 Pac. (Ore.) 965; Troll v. Third Nat Bank, 211 S. W. (Mo.) 545; Warrior Coal Co. v. National Bank, 53 So. (Ala.) 997; Gamble v. Dawson, 120 Pac. (Wash.) 1060.) In cases of administration it has been held that the situs of certificates of corporate stock is in the State of incorporation for the purposes of administration. (Grayson v. Robertson, 25 So. (Ala.) 229; Richardson v. Busch, 95 S. W. (Mo.) 894.) Some jurisdictions hold that the situs of corporate shares is at the domicile of the owner of the shares, (Miller’s Estate v. Executrix, 136 Pac. (Kan.) 255,) but in no case, so far as we have been able to ascertain, has it been held that the situs of certificates of shares of corporate stocks is at the place where the certificates happen to be. ’ ’

“Since the certificates are only evidences of the ownership of the shares, the interest or property represented by the shares is held by the company for the benefit of the owner of the certificates. As the habitation or domicile of the corporations is and must be in the State that created them, the property represented by the certificates is deemed to be held by the corporations within the States whose creature they are, and the majority of courts hold that the situs of shares of stock in a corporation is in the State in which the corporation is organized. (Jellenik v. Huron Copper Min-

In the Martin case it was argued, as here, that since the holding corporations maintained their offices and transacted business and maintained their sole transfer agents at Chicago, and only held stockholders’ meetings in Delaware, the state of their incorporation, the domicile of the companies should be Illinois. Answering this contention the court said:

“The rule as to the domicile of holding corporations and the situs of their corporate shares does not differ from the rule as to other corporations. A stockholder in a holding corporation is not a stockholder in the companies whose stock is owned by the holding company, but the interest of such stockholder in the holding company is similar to the interest of any other stockholder. (Sabre v. United Traction Co., 225 Fed. 601.) The principle that the habitation or domicile of a corporation and the situs of its corporate stocks are in the State of its incorporation is not affected by the fact that its business and offices are conducted and located in another State or that its books, records and transfer agents are in another State. (Jellenik v. Huron Copper Mining Co. supra.) The certificates for the corporate shares had no situs in Illinois for the purpose of administration, and they should have been omitted from the inventory.”

And on the question of estoppel raised in the Martin case as in the instant case, the court said:

“There is absolutely no ground for the assertion that plaintiff in error was or is estopped to question the inventory of the certificates of stock as assets in Illinois for the purposes of administration. The facts set out in the petition aré very full, and they completely answer every claim of defendant in error of an estoppel of any character. It is several times stated by the defendant in error that the petition for lettérs ancillary stated that the stocks and bonds were assets in Illinois. We have set out every fact stated in the joint petition filed by the ancillary executors, and there is no statement anywhere therein that the certificates of stocks or the bonds were assets in Illinois. They set out in this petition the exact facts that the certificates and bonds were in this State as collateral security for the debt of the Central Trust Company and that they were inventoried by the New York executor as assets for the purpose of administration in that State, but there is no statement or intimation therein that they were assets for the purpose of administration in this State. The trust company was advised by the New York executor from the very beginning that he did not consider either the bonds or the certificates as assets for administration in Illinois. He endeavored to pay off the debts to the trust company before they filed their inventory and get possession of the bonds and certificates as New York executor before the inventory was filed by them, and ever since that time it has been his claim that they were not assets for administration in Illinois.”

This reasoning is peculiarly applicable to the contention in the instant case and decisive as against complainant’s contentions.

We therefore hold that the 7,500 shares of stock in the securities company are not assets in Illinois, and that the .title to such stock did not vest in the administrator defendant. It therefore follows that the chancellor erred in not sustaining the demurrer of the bank to the second amended supplemental bill. The situs of the securities company stock not being in Illinois, therefore the court had no jurisdiction to make any order or decree regarding the ownership of the same or to order the distribution thereof. It follows that the circuit court was without jurisdiction to enter the decree it did.

Therefore, for.the reasons hereinbefore stated, the decree of the circuit court is .reversed with directions to that court to dismiss the bills before it for want of jurisdiction.

Reversed .and remanded with directions.

Wilson and Ryner, JJ., concur.


text:
    Ewald E. Mueller, Receiver of the Kimbark State Bank, Appellant, v. Tillie H. Novak et al., Appellees.
    Gen. No. 32,762.

      Heard in the third division of this court for the first district at the June term, 1928.
    Opinion filed January 30, 1929.
    Rehearing denied February 14, 1929,
    Wetten, Pegler & Dale, for appellant.
    Leslie A. Needham, for appellees.
   Mr. Presiding Justice Holdom

delivered the opinion of the court.

The controversy in this case arises on a bill filed by Ewald E. Mueller, as receiver of the Kimbark State Bank, to foreclose a trust deed made by Tillie H. Novak and her husband, Charles W. Novak, to the Chicago Title and Trust Company as trustee, conveying 13 vacant lots situate in the City of Chicago, and made to secure the principal note of Charles W. Novak for the sum of $2,700 and one unpaid coupon note for $81, evidencing the last semiannual instalment of interest prior to the maturity of the principal note.

The fact that the trust deed was executed to secure the note of Charles W. Novak for the sum of $2,700 with interest, as charged in the bill, stands undenied by the Novaks. However, they seek to avoid liability upon the ground alleged in their answer to the bill that there was a “total want and failure of consideration.” The complainant parried this alleged defense mainly upon the ground that Tillie H. Novak and Charles W. Novak were estopped to assert such a defense. The defenses of a want and failure of consideration are in the first place illogical. One of either might be maintainable, but if there was a total want of consideration, then there could have been no failure of consideration, but be this as it may, the record in our judgment sustains the finding of the master in his report to the chancellor, that the doctrine of estoppel rebutted and made unavailing such defense.

Upon the final hearing before the chancellor of the exceptions of the two Novaks to the master’s report, the complainant proffered a second amendment to his bill, which embodied certain facts developed by the evidence of the defendants before the master, which if allowed, would be a bar to their defense. The chancellor denied permission to the complainant to file such amendment and this ruling of the chancellor is assigned and argued as error.

At the time when complainant moved to amend his bill the condition of the record was such that he had a right to make such an amendment. The refusal to allow him so to do was an abuse of judicial discretion and constituted reversible error. «

As said in Prentice v. Crane, 234 Ill. 302:

“Appellants certainly had the right, under the statute, to amend their bill and introduce allegations to meet the conditions of the proof after the evidence was heard.” .

In South Chicago Brewing Co. v. Taylor, 205 Ill. 132, the court said:

“The amendment was proper, since a complainant must recover on the case made by his bill, and appeh lant had a right to answer and contest the case on which appellee claimed relief. ... It was also proper to allow the amendment after the proofs were taken, so that the allegations and proofs might correspond. ’ ’

The amendment to the bill proffered by complainant was material and necessary to meet a situation which developed from the proofs of defendants before the master, and such amendment was essential to complainant’s cause of action. It has been the policy of courts to be liberal in permitting amendments to pleadings, and as it was so patent that the amendment tendered contained necessary averments to maintain the action as it then was with the proofs made before the master, complainant had the' right to have his motion to file such amendment allowed.

It is a maxim of equity that that which should be done will be regarded as done. Therefore, as applied to the record before us, we shall review the case by considering complainant’s proffered second amendment to his bill, which should have been allowed, the same as if it had been allowed, and for the purpose of this review will treat such amendment as a part of the record.

The master found, which there was ample evidence taken before him to support, that Charles' W. Novak and Frank H. Novak are brothers, and that Frank H. Novak was the attorney for the Kimbark State Bank at the time of and after the execution of the notes and trust deed in suit, and that Charles W. Novak and Frank H. Novak were law partners and were connected in business with Novak and Company and with Novak Agency and Loan Company; that they were agents and attorneys for Tillie H. Novak, and that after the recording of the trust deed in suit, and in the latter part of July, 1920, said Frank H. Novak and Charles W. Novak delivered the notes and trust deed to the Kim-bark State Bank; that Tillie H. Novak knew that the trust deed and notes were in the Kimbark State Bank, and that she never made any demand on the bank for any part of the money represented thereby; that Tillie H. Novak testified that all of her business was transacted by her agents, her husband Charles W. Novak and his brother Frank H. Novak.

The master further found that said notes and trust deed remained with the Kimbark State Bank until the appointment of complainant as receiver thereof, when they came into his hands as such receiver, and were then held by him as such receiver, except that coupon interest notes one, two, three, four and five, had been paid to said Kimbark State Bank by said Charles W. Novak, or by some one for him.

The master further found that though Tillie H. Novak and Charles W. Novak testified that they received no money for the notes involved in the litigation, and the evidence is not clear as to whether or not they received any valid consideration therefor, the evidence seems to the master, he so reports, to be clear, and he so finds that Charles W. Novak and Frank H. Novak were given by Tillie II. Novak full and complete authority to transact business for her in relation to the said trust deed and notes, and that the said Charles W. Novak delivered said notes to said Kimbark State Bank for the purpose of swelling its assets in order to deceive the bank examiners, the depositors of the bank and the public generally; that from the conduct and actions of the said Novaks, above recited, the master concluded that the defendants Charles W. Novak and Tillie H. Novak were estopped to question the right of the complainant receiver to foreclose on said notes and. trust deed.

And the master further found that the said trust deed was a good, valid and subsisting first lien on the premises therein conveyed for the full amount of the indebtedness described in and secured thereby, with interest charges, fees and disbursements accruing under the terms and provisions of said trust deed and the notes described therein, and in stating the account found that the whole amount due at the time was $4,043.58, and that complainant had a first and prior lien upon the premises conveyed for said last-mentioned sum, together with interest upon $3,693.58 thereof at 5 per cent per annum from January 9, 1928, the date of his report, with costs of suit, and that Charles W. Novak was personally liable to complainant for said sum of $4,043.58 with interest and costs, and the master recommended to the court that a decree of foreclosure and sale be entered in accordance with his findings.

Tillie H. and Charles W. Novak filed objections before the master to his report, which the master overruled, and they were refiled before the chancellor as exceptions to the master’s report, which the chancellor sustained, and dismissed the bill for want of equity.

A careful scanning of all the evidence in the record impels us to the conclusion that the master rightfully decided that the doctrine of estoppel was applicable, and that the defendants Tillie H. and. Charles W. Novak, by their conduct, were estopped to deny as against the complainant receiver the bona fides of the transaction evidenced by the trust deed and notes secured thereby, sought to be foreclosed in this proceeding.

No attempt was made by either Tillie H. Novak or Charles W. Novak to challenge the bona fides of the trust deed executed by them to secure the payment of the $2,700 note of Charles W. Novak, until a little time before the filing of the bill herein, when they filed an intervening petition in the chancery proceeding, winding up the affairs of the Kimbark State Bank, in which they requested that the trust deed and notes in controversy in this litigation be returned to them by the receiver on the contention that they had received no consideration for the same. The issues on the intervening petition were referred to Master in Chancery Doyle, who after hearing the proofs concluded that the intervening petitioners were estopped to reclaim the securities from the receiver. Upon exceptions to such intervening petition being heard by the court, the intervening petitioners dismissed their petition.

The Kimbark State Bank had held these securities continuously for a period of about two and one-half years, during which time they had been held by the bank as part of its assets and so reported to the State auditor of public accounts and to the stockholders of the bank. Under well-settled principles of law the receiver. took the trust deed and notes as an innocent purchaser for value. Tillie H. Novak intrusted these securities to her husband and his brother Frank H. Novak, and with knowledge allowed them to pass to the Kimbark State Bank and to be held by it as assets of the bank, and she was bound by the conduct and actions of her agents and. attorneys Charles W. and Frank H. Novak. In law their knowledge was imputable to their principal, Tillie H. Novak. Dewees v. Osborne, 178 Ill. 39, is a case amply supporting the foregoing statement of law. It was there held that assignments of life insurance policies by the beneficiary, a.wife, to a bank to secure her husband’s indebtedness are not released by the bank’s renewal of notes without her consent, where her husband acting as her agent obtained her general' assignment of the policies to the bank, which he delivered to the latter as collateral se-’ curity for existing or future indebtedness. And it was further there held that a wife having knowingly permitted a bank to pay heavy premiums on life insurance policies until maturity, a period of over six years, under her assignment thereof to secure her husband’s debts, is estopped to claim that the assignments had been released by the bank’s renewal of her husband’s short-time notes. By analogy the principle of law announced in Dewees v. Osborne, supra, is controlling here.

The receiver of an insolvent bank, when attempting to marshal the assets of such bank for the benefit of its creditors, is in law an innocent holder of such assets and may maintain an action like the one at bar, even where the bank itself could not do so. Golden v. Cervenka, 278 Ill. 409; Niblack v. Farley, 286 Ill. 536.

It is argued that Tillie H. Novak is innocent of any actual wrongdoing in the matter of the trust deed in question. Even conceding, which we do not, for this purpose, that she was innocent of any wrongdoing, still she could not avail of that fact in this proceeding, because the receiver is also an innocent party and, in law, an innocent holder of the security for value without notice of any equitable defenses. The rule is that where there are two innocent persons, one of whom must suffer loss by reason of the wrongful act of a third party, the party who made it possible by his own negligence for the third party to commit the wrongful act must stand the loss. Applying this rule to the instant case, Tillie H. Novak, having by her conduct made it possible for other innocent persons to be deceived, must suffer the loss. Patton v. Young, 233 Ill. App. 515; Drumm Const. Co. v. Forbes, 305 Ill. 303.

Frank H. Novak testified that several opinions of title to the property covered by the trust deed in suit were given to the bank by the firm of Novak and Novak, and that one of such opinions was dated September 12, 1921, one year and three months after the security was delivered to the bank, and in that opinion, signed in the firm name by Charles W. Novak, the fee title was certified as being good in Tillie H. Novak, subject to the lien of the trust deed in this foreclosure proceeding.

Tillie H. Novak, as before said, is charged with knowledge of the actions and conduct of her agents and attorneys in not only delivering the securities to the bank, but in furnishing the bank with an opinion that the title to the property conveyed by the trust deed was in her, subject only to the lien of that trust deed.

The trust deed and notes in question were given to the bank and formed a part of its assets for the purpose of swelling its assets and leading the public officers, such as the auditor of public accounts, as well as the stockholders of the bank and those dealing with it, to believe that the securities were a part of the assets of the bank. As said in Golden v. Cervenka, supra:

“Where notes or other securities have been executed to a bank for the purpose of making an appearance of assets, so as to deceive the examiner and enable the bank to continue business, although the circumstances may have been such that the bank itself could not have collected the securities, it has been held that the receiver, representing the creditors, could maintain the action, and the makers were estopped upon the insolvency of the bank, to allege want of consideration.”

In the case of Leopold v. Milwaukee-Western State Bank, 250 Ill. App. —, the whole subject matter of depositing securities for the purpose of swelling the assets of a bank in failing condition is thoroughly discussed with an abundance of supporting authority. As there said:

“Under the evidence given on the trial and the undisputed facts appearing in the record, the plaintiff Leopold was estopped to question the bona fides of the transaction between himself and the State Commercial & Savings Bank or its binding force.' To hold otherwise would defeat the very object which was desired and intended to be attained by all the parties in interest, which was to make good the depleted assets of the bank, and would in effect result in fraud upon the bank’s creditors.”

And in Handley v. Drum, 237 Ill. App. 587, the court said that it is stated as a general rule that a party to a written contract may not contradict the terms of his contract by parol; that a defendant in an action on a note, unconditional in its terms, cannot show by parol, even as against the payee, that the parties had an understanding that the contract was in fact conditional, and further, that an agreement that the note in question was not to take effect until sufficient dividends had been declared upon the shares of stock in consideration of which the note was given, to amount to the face value of the note, with interest, did not affect the delivery of the note, but merely made its payment conditional, and consequently parol proof would not be received to contradict the express terms of the note. First Nat. Bank of Mt. Carmel, Ill. v. Holsen, 245 Ill. App. 75; State Bank of West Pullman v. Hovnanian, 250 Ill. App. 144.

It is clear that the Novaks are estopped from challenging the bona fides of the transaction between Tillie H. Novak and Charles W. Novak and the Kimbark State Bank, involving the trust deed securing the $2,700 note, sought to be foreclosed in this suit. The parties are bound by the terms and conditions of said trust deed and the notes secured thereby.

For the foregoing reasons the decree of the circuit court is reversed, and the cause is remanded with directions to the circuit court to allow the second amendment proffered on the trial by complainant to be filed, and to enter a decree confirming the master’s report, and ordering a sale of the property conveyed by the trust deed for the amount found due by the master, with interest thereon subsequently to the date of said report accruing.

Reversed and remanded with directions.

¡Wilson and Ryner, JJ., concur.