text:
    Joseph A. Campagna, also known as Joseph A. Companion, for Use of Chas. Kolarik and Anna Kolarik, Appellant, v. Automatic Electric Company, Appellee.
    Gen. No. 39,783.

      Opinion filed January 31, 1938.
    Rehearing denied February 14, 1938.
    Walter Hamilton, of Chicago, for appellant.
    R. W. Hamill, of Chicago, for appellee.
   Mr. Justice Matchett

delivered the opinion of the court.

The judgment creditors in an action of garnishment appeal from an order discharging the garnishee. The undisputed evidence showed that the judgment debtor was the head of a family, residing with the same. The demand in garnishment was served on the debtor and also on the garnishee on March 29, 1937. The summons in garnishment issued March 31 and was served on the garnishee at 10:30 a. m., April 1. April 8 the garnishee answered that it had no funds or property of the debtor employee. The answer said: “This defendant (garnishee) further states that said defendant, Joseph A. Companion, is employed by this garnishee and is.being paid his salary semi-monthly in advance ; that the reason for so paying said defendant in advance is because the garnishee believes the plaintiffs are using the garnishee proceedings in this case unfairly and unjustly in order to harass the defendant, Joseph A. Companion, into giving a quit claim deed to the plaintiffs on a two-flat building owned by the defendant and others, and thus deprive the defendant of his right of redemption under any foreclosure plaintiffs may bring.”

The answer was contested but the garnishee was discharged as stated. The judgment creditors called the attorney for the garnishee as a witness. He testified to a conference with the attorney for the judgment creditors prior to the beginning of the proceedings, at which the attorney for the judgment creditors said they would release the judgment against the debtor if he and his wife would quitclaim a certain building on which the creditors held a mortgage, which was in default. Witness suggested that the premises were worth more than the mortgage, and that the creditors should foreclose, giving the debtor his opportunity to redeem. He protested the use of garnishment proceedings to compel the execution of a deed. The assistant treasurer of the garnishee was also called as a witness by the judgment creditors. He testified that the debtor was employed by the corporation as a checker, and that he received $170 to $175 a month; that it had been usual to pay him on the 5th and 20th of each month; however, on March 12, 1937, the debtor asked if he could have his check in advance. The witness consulted their attorney, who told him that if he wished he could legally make the payment; accordingly, on March 12 the garnishee paid the debtor in advance his salary for services to be performed by him from March 15 to April 1, 1937, and on April 1, again in advance, paid him for services to be rendered up to April 15, 1937. It will be noted that the writ of garnishment was served on April 1st.

The question raised is whether under the Garnishment Act, Ill. Rev. Stat. 1937, ch. 62, § 1 et seq.; Jones Ill. Stats. Ann. 109.284 et seq., an employer may without liability advance the wages or salary for services to be thereafter performed to such employee. Plaintiffs say the employer may not rightfully do so where it is the intention of the employer and employee to prevent the seizure of such wages or salary by the garnishment process. They say the courts have power to disregard assignments and transfers whereby the parties intend to prevent a judgment creditor from satisfying his judgment; that such assignments and transfers are void as collusive and fraudulent against the creditors. They cite Grassly v. Reinback, 4 Ill. App. 341; Kittredge v. Slack, 67 Ill. App. 128; Mayr v. Hodge & Horner Co., 78 Ill. App. 556, and Patton v. Gates, 67 Ill. 164. They also argue that the facts above recited show it was the intent and purpose of both the garnishee and the judgment debtor, by the payment of the salary by way of advancement, to prevent plaintiffs from satisfying the judgment from the earnings of the judgment debtor; that this amounted to fraud and collusion which will not be allowed to defeat a recovery in garnishment. In support they cite Chicago & E. I. R. Co. v. Blagden, 33 Ill. App. 254, and a number of cases from other jurisdictions, such as Barnes v. Walthke & Co., 116 S. W. 7 (Mo. App. 1909); Kruckemeyer Co. v. Burckhauser, 4 Ohio App. 369, and Dinkins v. Cruden-Martin Woodenware Co., 91 Mo. App. 209. As the proceeding by way of garnishment is purely statutory, cases decided by the courts of other States under statutes materially different are of little aid in the construction of our own statute. The Illinois cases above cited with the exception of the Blagden case are distinguishable upon the facts, the question in those cases being whether alleged assignments made prior to the service of the garnishment writ were effective as against it. As already said, the garnishment proceeding in this State is purely statutory, and it is an action at law, not in equity. Capes v. Burgess, 135 Ill. 61; First Nat. Bank v. Hahnemann Institutions, 356 Ill. 366. The garnishment statutes are found in Ill. Rev. Stat. 1937, ch. 62, § 1 et seq., pp. 1728-1734; Jones Ill. Stats. Ann. 109.284 et seq. Section 1 of the act describes the property which may be reached by the process, and construing this section of the act in Capes v. Burgess, 135 Ill. 61, the Supreme Court said: “This provision clearly indicates an intention to subject to the process of garnishment two classes of assets and two only, viz., 1. debts owing from the garnishee to the judgment debtor, and, 2. effects or estate of the judgment debtor in possession, custody or charge of the garnishee.”

Construing the 5th section of the act the court said it had been claimed that the provision thereof requiring the garnishee to answer as to “debts due and to become due” extended the scope of the act so that not only debts which were due but also debts to become due from the garnishee to the defendant could be reached, and that this would include every species of liability from the garnishee to the debtor. The court said this was not so. “It would thus seem that the language of sections 5 and 7, when properly considered, must be held to limit the claims against a garnishee capable of being reached by this proceeding, to indebtedness the amount of which is liquidated, and does not apply to liabilities for unliquidated damages. ’ ’

The opinion stated that any doubt of this construction was removed by a consideration of sections 19 and 21, where the judgment to be rendered against the garnishee was described in terms which indicated the nature of the liability for which the judgment might be rendered was a debt. The court said: “The test applied by many of the courts to a liability which may be made the subject of garnishment is, that it must be ‘a legal debt due or to become due — a debt for which the defendant might maintain an action of debt or in'debi- tatus assumpsit.’ Drake on Attachment, sec. 545, and authorities cited.”

In conformity with this view in the recent case of Drysch v. Prudential Ins. Co., 287 Ill. App. 68, and following our decision in Larson v. McCormach, 286 Ill. App. 206, this court held in substance that generally a judgment creditor could recover by garnishment only such indebtedness as his debtor might recover in an action against the garnishee. Manifestly, unearned wages or salary are not such a credit as is contemplated by the statute, as the payment of such wages or salary as may become due rests wholly upon contingencies of many kinds. The employer may never be obligated to pay unless the employee performs his part of the contract through the rendition of services. Illness may render the employee incapable of performing such service or the employee may for any reason, however capricious on his own part, refuse to perform the services; and manifestly a State which refuses to recognize peonage as lawful may not interfere with the freedom of the employee in this respect. If the employer sees fit to pay for services before they are rendered, he takes the risk of never receiving the consideration for which the payment is made, but manifestly, at the time he makes the advancement he owes nothing which can be collected by process of law by the employee. He owes no debt; he owes no obligation; and the debtor may not appropriate that which in fact does not exist. As already said, the plaintiffs cite Chicago & E. I. R. Co. v. Blagden, 33 Ill. App. 254, but the case is against rather than for their contention. That was an appeal from the superior court from a judgment entered against the garnishee for $103 upon appeal from a justice of the peace. The answer of the garnishee showed that only $6 was due at the time of the service of the writ. In response to interrogatories filed the garnishee answered that Blagden, the wage earner, was in its employ from the date of the service of the writ until February 13,1888, and that during all that time his salary was at the.rate of $60 a month; that the salary was for each month due and payable after the first day of the following month; that on the date of the service of the writ, which was the 18th day of June, 1886, the garnishee advanced to Blagden $24; that on the first day of July the garnishee advanced to him $30, and that thereafter, on or before the 15th and likewise on or before the first day of each and every month, up to and including the first day of February, 1888, the garnishee advanced to the debtor a like sum of $30, and that there was not any time between June 18, 1886, and the date of the answer, October 19, 1888, that any sum of money ivas due or owing from the garnishee to Blagden. No evidence was given at the trial and the court entered judgment against the garnishee, which on appeal was reversed. Judge Moran, writing the opinion of the court, said:

‘ Collusion by the company with Blagden to prevent the plaintiff from obtaining anything that the services of the writ upon the garnishee entitled him to, is, to say the least, not necessarily to be inferred from the facts set up in the answer. Such inference is, as it seems to us, in fact negatived. Blagden was not obliged, so far as appears, to continue in the employ of the company after the service of the writ, and if he did, then there was nothing to prevent the company from paying him in advance, even though the very purpose of such advance payment was to prevent the wages from being reached under the garnishment. . . .

“No fraud being shown, appellee could recover nothing from the garnishee that Blagden himself could not recover in an action at law in his own name. ’ ’

That case, as it seems to us, so far from sustaining the position of the creditors is against them.

In the case of Davis v. Siegel, Cooper & Co., 80 Ill. App. 278, it appeared that the garnishee was served with process August 7, 1897, and in reply to interrogatories stated in substance that at the date of the service of the writ Davis was and still remained in its employ. The salary was $20 a week, payable after the first day of the week next after being earned; on August 6, 1897, it advanced to Davis $20; thereafter and up to the time of answering it had advanced him on the first day of each following week a like amount, with the understanding that he would pay in services thereafter to be rendered, and that Davis was the head of a family and resided with his family. The court held that the garnishee was not liable and the creditors appealed. It was contended that the payment to Davis of his wages in advance of his earning them was fraudulent as to plaintiff and collusively evasive of the statute, and that section 14 of the Garnishment Act, Ill. Rev. Stat. 1937, ch. 62, §14; Jones Ill. Stats. Ann. 109.297, as amended by an act in force July 1, 1897, in effect authorized the garnishment of wages earned after the service of the writ. The court, after analyzing this section, said: ‘ ‘ Clearly, a debtor cannot comply with a demand to turn over to the judgment creditor wages which the former has never earned and may never earn. He cannot turn over that which is nonexistent, and if, by a proper construction of the section, the demand should be made on the garnishee, it is plain that the latter could not be required to turn over unearned wages.

“We are therefore of opinion that the statute does not contemplate the garnishment of unearned wages. . . .

“The answer of the garnishee is, as before stated, that August 6, 1897, the garnishee advanced Davis a week’s salary, also that on the first day of every week thereafter, up to the time of filing its amended answer, it had advanced him a week’s salary; that during said time it owed him nothing, and that at the date of the service of the writ, it was not in any way indebted to him. Plaintiff relied solely on the garnishee’s answer in respect to its indebtedness to Davis. There having been nothing due to Davis at the date of service of the writ, and holding, as we do, that the statute has no application to unearned wages, this is conclusive as against plaintiff’s claim.” The judgment was affirmed.

In Lund v. Dole Valve Co., 185 Ill. App. 350, the question was considered so thoroughly settled that the opinion of the court is only abstracted to this effect: •‘Section 5 of the Garnishment Act, J. & A. ft5940, does not authorize garnishment process against un-' earned salary, and cannot be construed to reach the salary to be earned after answer made.”

In Holmberg v. General Electric Co., 211 Ill. App. 301, the question again arose and was evidently considered so thoroughly settled that the opinion is only abstracted as follows: “Payment of wages in advance by an employer after the service of a garnishment writ does not render him liable in the garnishment proceedings. ’ ’

In Wilt v. Hartman Trunk Co., 215 Ill. App. 182, the question was, however, raised again upon appeal to this court from a judgment of the municipal court of Chicago. In that case the answer of the garnishee in the municipal court was that Wilt, the judgment debtor, was in the employ of defendant since January 29, 1918; that since the date of his employment the defendant had paid him $50 a week for his services ; that this employment was at the will of his employer; that on September 6, 1918, Wilt applied to defendant for payment of his wages in advance, to which request defendant acceded and ever since had so paid him; that neither at the time of the serving of the garnishee writ nor the filing of the answer was defendant indebted in any sum to Wilt. The answer was contested and without taking any evidence the trial judge entered judgment against defendant garnishee for $350. The opinion of this court reversing the judgment, says:

“It is clear from this record that defendant was at no time indebted to Wilt, its employee. As his wages were paid in advance, there was never anything due him at the several times when he was paid $50. This manner of dealing between employer and employee is sanctioned by the law of this State. The method of paying an employee in advance has been held to be valid in Chicago & E. I. R. Co. v. Blagden, 33 Ill. App. 254, and there it was in effect decided that it was immaterial whether such an arrangement was made for the purpose of escaping the effect of garnishee proceedings or not. Davis v. Siegel, Cooper & Co., 80 Ill. App. 278.”

In Mutual Service Corp. v. Hugren, 225 Ill. App. 216, the question again came before this court upon appeal from the municipal court of Chicago. In that case the garnishee answered that at the time of the service of the writ Hugren, the employee and debtor, was in the employ of the garnishee on a salary. At the time of the service of the writ he was a wage earner, and the garnishee was not indebted to him. The plaintiff moved to strike the answer for insufficiency because it did not appear that Hugren was the head of a family and residing with the same. Secondly, that the answer failed to disclose the rents, tenements, goods, chattels, moneys, choses in action, credits and effects of Hugren and the value thereof, or from them due and owing to the defendant at the time of the service of the writ or at any time thereafter, or which should or might thereafter become due up to the time of answer. The motion was denied, and an order entered discharging, the garnishee. It was contended upon appeal that the answer was insufficient in respects stated and in particular because it did not answer as to moneys owing and due after the date of the service of process and up to the date of the answer. The opinion of the court held that the creditors had waived merely technical objections; that the principal question argued involved a consideration of section 14 of the Garnishment Act, which in one form or another had been a part of the garnishment law of the State since 1861. (Laws of 1861, p. 178, section 2.) After citing the language of the Supreme Court in Bliss v. Smith, 78 Ill. 359, and of this court in Davis v. Siegel, Cooper & Co., 80 Ill. App. 278, we said: “Such was the law at the time section 14 was revised and amended in 1901. It is impossible to believe that if the legislature had intended to make a radical change in this law, it would have employed equivocal language to do so. Taking into consideration the language of the section, the context, the purpose of the enactment and its history, we conclude that this clause of the section must be construed to mean just what it says — that no employer served with a garnishment writ shall in any case be liable to answer for any amqunt not earned by the wage earner at the time of the service of the writ. That is the reasonable construction; not only is it reasonable, but just, and public policy as well constrains us to so hold. Future wages may or may not be earned. It is not reasonable to suppose that the law would direct that to be seized which does not in fact exist. Debts ought in justice to be paid, but the creditor ought not to be permitted to seize the means whereby the laborer lives while earning that wherewith to pay, and the State is vitally interested that such injustice should not be permitted.” The judgment was affirmed.

In First Nat. Bank of Knightstown v. Hosier, 234 Ill. App. 605, the garnishee appealed from a judgment entered against it in the municipal court of Chicagu in the sum of $133.45. The garnishment writ was served upon the garnishee April 26, 1923, and May 21, 1923, the garnishee answered that it had no goods or chattels nor credits, etc., but that on the contrary on that date Hosier, the debtor, was indebted to it in the sum of $324 on certain promissory notes. No witnesses were heard, but counsel for the garnishee stated upon the hearing that Hosier was in the employ of the garnishee at a salary of $55 a week; after hearing the arguments of counsel the court found the issues in favor of the plaintiff and entered the judgment appealed from. The court said that no effort had been made by the plaintiff to overcome the statement made in the sworn answer to the effect that the garnishee owed Hosier nothing at the time of the service of the writ, and the court having nothing further before it except the statement of counsel for garnishee to the effect that Hosier was in the employ of the garnishee at a salary of $55 a week, reached the amount of the finding in judgment by computing Hosier’s salary accruing after the service of the writ and possibly deducting certain amounts as exemptions; that it was argued by counsel for the plaintiff that the garnishee was liable for the salary accrued to Hosier at the time of the service of the writ, “and for salary accruing after that time up to the filing of the answer by the garnishee,” citing Hanover Fire Ins. Co. v. Connor, 20 Ill. App. 297, and Howard Co. v. Miller, 123 Ill. App. 483. The court said that the cases cited did not involve the question of the exemption of a wage earner as was true of later eases cited. It had been decided after the legislature amended section 14 of the Garnishment Act that that section not only covered the question of exemption to which the wage earner was entitled, but also provided that, “No employer so served with garnishment shall in any case be liable to answer for any amount not earned by the wage earner at the time of the service of the writ of garnishment. ’ ’ The court then pointed out that in Fuller v. Bridgeport Wood Finishing Co., 203 Ill. App. 227, it was held that under this section the garnishee was not required to answer for wages earned by a wage earner after the service of a writ of garnishment, citing Lund v. Dole Valve Co., 185 Ill. App. 350, which case did not involve any question of the exemption of the wage earner. The court concluded:

“We are of the opinion that wherever a judgment creditor seeks to subject to his judgment an indebtedness owing from a garnishee to a judgment debtor, he may by appropriate garnishment process accomplish that object as to any debt so becoming due from the garnishee to the judgment debtor, at any time up to the filing of the answer but not thereafter. But if he seeks to subject to his judgment any amount due from the garnishee to the judgment debtor as salary or wages, the judgment debtor being a wage earner, he may not secure anything but such wages or salary as may be shown to have been due and owing from the garnishee to the judgment debtor at the time of the service of the garnishment writ, irrespective of whether the situation involves a question of exemptions or not. Section 14 of the Garnishment Act, as amended in 1901, distinctly says that, ‘No employer so served with garnishment shall in any case be liable to answer for any amount not earned by the wage earner at the time of the service of the writ of garnishment. ’ Section 2 of the Act of May 11, 1901, by which the legislature adopted this amendment to the Garnishment Act, provides that ‘all acts or parts of acts in conflict herewith are hereby repealed. ’ Laws of Illinois, 1901, p. 215. ...” The judgment was reversed.

Plaintiffs cite a number of cases: Wilcus v. Kling, 87 Ill. 107; Paisley v. Park Fireproof Storage Co., 222 Ill. App. 96; Hudson v. Hudson Motor Co. of Illinois, 238 Ill. App. 391; Harris v. Montag, 247 Ill. App. 89, and Baird v. Luce-Stevenson Co., 262 Ill. App. 547. We have given careful consideration to each of these cases and without attempting to discuss them in detail we think no one of the cases is applicable. Practically all of them rely upon Wilcus v. Kling, supra. In that case there was no question of wages or salary and there was no question of payment in advance. It was there claimed that the garnishee was indebted under his contract to pay for the building* of a house which had been completed months before the writ of garnishment was served. The evidence showed that several thousand dollars were paid to the debtor pending the proceedings. The court said the question was whether Kling could “maintain an action of debt or assumpsit against these appellants on this contract ’ ’; that the garnishees had admitted there was money due from them by making payments on orders drawn on them by Kling subsequent to the service of the writ of garnishment and which orders were for materials and labor on these buildings “appropriated before the service of the writ. ’ ’ From all the evidence the court concluded that the garnishee was liable. The case arose in 1874 and was decided at the September term, 1877, before the jurisdiction of the Supreme Court was limited to the consideration of questions of law. The case by no means holds that the mere fact that a payment is made after the service of the garnishment writ irrespective of other circumstances renders the garnishee liable.

In the Paisley case it was held (and that was the principal issue in the case) that the debtor, who worked as an estimator ascertaining prices to be charged for moving and storage, was not a wage earner within the meaning of section 14 of the Garnishment Act. The opinion did say, citing the Wilcus case, that the garnishee by paying $82 after the service of the writ, ‘ ‘ admitted an indebtedness to that. ” As we have already seen, the Wilcus case did not justify a holding of liability on that ground alone.

In the Hudson case the court held as a matter of fact that the debtor was paid his salary, “as salary already earned cmd not as an advancementand the garnishee was therefore liable. The inference is that if the payment to the debtor had been made by way of advancement the credit would not have been subject to the garnishment writ. Here, too, the opinion cites the Wilcus case, which we have already considered.

In Harris v. Montag the sole question considered was whether under section 14 of the Garnishment Act a garnishee was required to answer for wages which became due after the service of the writ and up to the time of answer. The court held that the clause in section 14 which provides, “no employee so served with garnishment shall in any case be liable to answer for any amount not earned by such employee at the time of the service of the writ of garnishment,” was limited to wag*e earners whose wages or salary was exempt under the first paragraph of the section. This interpretation was based upon the theory that the words, “such employee” referred back to the class of employees declared to be exempt under the first paragraph of section 14. No question of advancement was raised in that case, and the opinion adopts language which would justify the inference that if advancements had been made prior to the service of the writ the garnishee would not have been found liable. The opinion states: “As there is nothing in the evidence that warrants treating these payments either as advancements or a set-off the garnishee must be held to have recognized them as an indebtedness at the time they were charged to the commission account.”

The opinion, however, does indicate that the garnishee would be liable to answer for wages earned after the service of the writ and up to the time of answer, which is directly contrary to the Burgess and other cases.

The Baird case was tried on a stipulation of facts to the effect that between the service of the writ and filing of the answer the garnishee paid to the debtor $530 as an advance or drawing account against future commissions to be earned by him; that at the time of the service of the writ the debtor was indebted to the garnishee in the sum of $4,000, likewise advanced against commissions to be earned. At that time commissions were subject to garnishment without exemption, but now by amendment to the statute a debtor entitled to commissions is entitled to the same exemption as in cases of wages or salary. See Session Laws of 1933, p. 641, Ill. Rev. Stat. 1937, ch. 62, § 14, p. 1731; Jones Ill. Stats. Ann. 109.297.

The Davis case and the cases following it are, we hold, controlling in the instant case. Those upon which the judgment creditors rely are not applicable and as a matter of fact do not even discuss the actual question here to be decided. We hold that under the Garnishment Act an employer and employee have a right to enter into an arrangement by which the sums to be paid either as wages, salary, commissions or profit allowances to be thereafter earned shall be paid in advance; that such an agreement is not fraudulent and when made and fairly and honestly carried out, payment made according to such an agreement does not subject the employer to a second payment under the provisions of the Garnishment Act, for the reason that the creditor may not appropriate by the garnishment writ that which did not exist at the time it was served.

The judgment is affirmed.

Affirmed.

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


source: Caselaw Access Project

author: Mr. Presiding Justice Hebel

license: Public Domain

text:
    Otto Kerner, Attorney General of the State of Illinois, Appellant, v. William Hale Thompson et al., Appellees.
    Gen. No. 37,774.
    Opinion filed February 2, 1938.
    Rehearing denied February 18, 1938.

      Otto Keener, pro se; James G. Skinner, Assistant Attorney General, of counsel.
    James W. Breen, of Chicago, for appellee William Hale Thompson.
   Mr. Presiding Justice Hebel

delivered the opinion of the court.

This appeal was passed upon by this court, in which opinion we reached the conclusion that it should be dismissed. However, the Supreme Court held otherwise and remanded the cause for a hearing on its merits.

This action was instituted by Otto Kerner, as Attorney General of the State of Illinois against William Hale Thompson, the Waterway and Flood Control Association of the Mississippi Valley, a corporation, and others to protect and preserve a certain fund of money donated in 1927 for the use and benefit of flood sufferers in the Mississippi Valley, and to require defendant Thompson to account for and restore as a charitable trust the portion of the fund not used for the original purpose. The decree entered upon the finding of the trial court, found and decreed that the use and application made by the defendant Thompson of $72,794.79 of this fund be approved and confirmed, and ordered that the balance of the fund, amounting to $31,131.17 on deposit with the First National Bank of Chicago, be transferred and set over by defendants Thompson and the Waterway and Flood Control Association of the Mississippi Valley, a corporation, to the custody and control of the American National Red Cross, as trustee, to be used by such trustee for a purpose as closely related to the original purpose as may be. The appeal by the Attorney General of the State of Illinois is from that part of the decree which approves and confirms the use and application by the defendant, William Hale Thompson, of the sum of $72,794.79.

The cause was heard by the court upon the complaint as amended, the answer as amended, the replication of the plaintiff, and upon a stipulation of facts read into the record, and set out in full in the decree.

Immediately following the great flood in the Mississippi Valley in April, 1927, the defendant, William Hale Thompson, then mayor of the city of Chicago, by proclamation and appeals to the public received from the public as donations for the immediate relief of the flood sufferers the sum of $139,772.47. Of this sum the defendant Thompson paid for the relief of flood sufferers the sum of $35,846.51, and there was left on hand the sum of $103,925.96. At the hearing of the cause all defendants were dismissed except William Hale Thompson, the Waterway and Flood Control Association of the Mississippi Valley, and the First National Bank of Chicago. At all times the defendant Thompson had full control and disposition of the fund. On December 16, 1930, this defendant with two other defendants organized as an Illinois corporation, the Waterway and Flood Control Association of the Mississippi Valley, and shortly thereafter the fund was transferred to this corporation. Out of the sum so transferred, a total of $72,794.79 was disbursed for the following purposes:

1. —For payment of salaries of officers and employees, office rent, light and repairs, commissions and office expenses of The Waterway and Flood Control Association of the Mississippi Valley, a corporation. .$22,188.10

2. —For the publication and distribution of a magazine, the Inland Empire, in 1931, with the object and purpose of devising ways and means for the prevention of floods and to promote the development and extension of waterways in the Mississippi Valley, to secure the passage of legislation therefor, and to create sentiment in the various Congressional Districts that would induce representatives in congress to work and vote for flood control legislation, and to aid in the development of an inland waterway system, the sum of........................... 31,445.38

3. —For expense of a flood control conference held January 12, 13, 14 and 15, 1931, including expenses of conferences for rooms for officers and delegates, meals and entertainment, postage, printing, badges, tickets, signs, publicity, decoration and flags for delegates, and other incidental expenses................... 4,795.40

4. —Expense of trip to Washington in February, 1931, for hearing to promote execution of flood control work by the War Department, and to secure flood control legislation, including transportation, hotel accommodation and printing....... 1,264.36

5. —Expense of inspection tour of the Mississippi Valley in April, 1931, to study flood control and ascertain what work had been done under the appropriation of congress of May 15,1928, in the sum of.. 4,409.89

6. —Expense of waterway cruise of 1932 to inspect and survey work done under the appropriation of congress of 1928...... 1,091.66

7. —For attorney’s fees, defending litigation against said defendant Thompson in re said fund............................ 7,600.00

During the months of April and May, 1927, a flood in the Mississippi Valley caused great suffering and privation and thousands of persons were rendered homeless and were in great need of food, clothing and shelter, and the defendant Thompson, sent out a proclamation as follows:

“A great calamity has overwhelmed thousands of people in our own section of the country. Devastating floods have driven over 25,000 people from their homes in the Mississippi Valley and the danger is constantly growing. Extensive relief work will be needed in the following weeks to take care of all the sufferers.

I know that in the face of this danger which has come to the Mississippi Valley the citizens of Chicago will contribute liberally, as they have in all other instances where help was required. Therefore, as mayor of the city of Chicago, I call upon the citizens and inhabitants to give promptly and generously in this emergency, and I am confident that the response to this urgent call for help will be prompt and ample.

The need is great. Tour response should be immediate, to save lives endangered by the floods. Contributions will be received by Mayor William Hale Thompson’s Relief Committee and should be made payable to Charles Pitzmorris, Room 501, City Hall, Chicago.

William Hale Thompson, Mayor. ’ ’

As heretofore stated, there was collected the sum of $139,772.47, and it is the contention of the Attorney General that it became and was the duty of defendant Thompson to devote and expend said fund for the relief of the flood sufferers and that the defendant was charged with all the duties imposed upon trustees in the case of charitable trusts; that out of the sum collected, the defendant expended and paid out for the relief of flood sufferers the sum of $35,846.51, leaving an unexpended balance of $103,925.96.

That this fund when collected was taken over and administered by the defendant Thompson, under the name of “Mayor William Hale Thompson Flood Belief Fund, ’ ’ and, as indicated in this opinion, was later transferred to the account of “The Waterway and Flood Control Association of the Mississippi Valley”; that this association was a corporation organized under the laws of Illinois December 16, 1930, by the defendant, Thompson, and the defendants, Bichard W. Wolfe and James W. Breen; that the object for which said corporation was formed, as stated in its charter, was “to devise ways and means for the prevention of floods and to promote the development and extension of the waterways of the Mississippi Valley, and to secure the passage of such legislation as may be necessary therefor”; that the balance of the fund, after payment of $35,846.51 for the relief of the flood sufferers, at the direction of defendant Thompson, was transferred from December 18,1930, to and including January 17, 1931, from the account known as “Mayor William Hale Thompson Flood Belief Fund” to the account of “The Waterway and Flood Control Association of the Mississippi Valley”; that the sum of $72,794.79 was disbursed for the purposes hereinabove enumerated.

The court in its decree followed the suggestion of the Attorney General and applied the cy pres rule when it decreed:

“That the defendant, William Hale Thompson, be and he is hereby removed as trustee of the said fund or any part thereof collected for the relief ■ of flood sufferers in the Mississippi Valley, and that the defendants, William Hale Thompson and The Waterway and Flood Control Association of the Mississippi Valley, a corporation, be and they each are hereby directed to transfer and set over, within ten (10) days from the date of this decree to the custody and control of the American National Bed Cross, a corporation, as trustee, the said fund or sum of Thirty-one Thousand One Hundred Thirty-one Dollars and Seventeen Cents ($31,131.17) which sum is now bn deposit with the First National Bank of Chicago to the credit of The Waterway and Flood Control Association of the Mississippi Valley, a corporation, to be used by said American National .Red Cross for the relief of those who may be caused suffering in the future by reason of any floods which may occur in the Mississippi Valley, or for a purpose as closely related to the original purpose as may be. . . . ”

The sum of $31,131.17 was turned over by the defendants to the American National Red Cross, a corporation, as trustee, and the appeal by the Attorney General is from that part of the decree approving the action of the defendant William Hale Thompson in disbursing the sum of $72,794.79 for the purposes indicated in the statement of facts. It is contended by the attorney general that the disbursement of this fund was not applied in accordance with the accepted doctrine of cy pres rule. It is to be noted from the opinion of the court that in maldng its findings the court decreed that the moneys were to be applied in accordance with this doctrine, and the balance was to be set aside and held for further distribution for the relief of flood sufferers in the Mississippi Valley, or for a purpose as nearly related to the original purpose as may be.

The purpose of the fund accumulated was controlled by the" proclamation and appeal for funds issued by the defendant William. Hale Thompson at the time he was mayor of the city of Chicago. It is to be noted “that extensive relief work.will be needed ... to take care of. all the sufferers,” and it was for that purpose the contributions received were to be applied, and for no other purpose, and as trustee of this fund, the defendant Thompson was not authorized to expend the. surplus for uses outside the trust.

It appears from the facts as stipulated to by the parties to this litigation that it was two years after the last payment was made for relief of sufferers from this flood that the Waterway and Flood Control Association of the Mississippi Valley, a corporation, was organized and the balance of the money turned over to it by the defendant William Hale Thompson. It was never within the contemplation of the parties contributing to this worthy cause at the time the money was subscribed that the money was to be used for the purpose of paying the expense of maintaining an office, paying salaries of officers and employees, etc., after the Waterway and Flood Control Association of the Mississippi Valley was incorporated; nor was it contemplated, when the appeal was made to the public for contributions to this fund, that part of the money was to be used for purposes of publication, and the distribution of a magazine and the expenses incident thereto. This would apply with equal force to the other purposes which go to make up the total sum of $72,794.79, and the rule of law controlling would be that governing money subscribed such as was done in this case. The money was subscribed for a charitable purpose, and the courts will not countenance a lapse of this charity because relief was unnecessary after the defendant Thompson had paid all the expenses of such relief amounting to $35,846.51. This is forcibly illustrated by the language of the trial court in its finding— ‘ That in accordance with the accepted principles of cy pres the balance of $31,131.17 now on hand . . . should be set aside and held for further distribution for the original purpose of relief for flood sufferers of the Mississippi Valley or for a purpose as closely related to said original purpose as may be.” This finding of the trial court is not complained of by cross-error of the defendants, and the acceptance of the doctrine applied by the court in the instant case is best illustrated by an opinion, of our Supreme Court in the case of Bruce v. Maxwell, 311 Ill.479, where from the facts it appears that John Farrell, 80 years of age, a short time before his death conveyed certain property in Peoria, Illinois, to Mary L. Marratta, “during her life and afterwards to go to build an old man’s home. Reuben Bruce, trustee.” The court said:

“The cy pres rule was an English rule and formerly resorted to as an exercise of the prerogative power of the crown but is applied in this country as an exercise of judicial power. The basis of the rule is, that where the clear intention of the donor was that the gift should be devoted to a charitable purpose and the trust cannot be administered in the exact way directed, the donor’s purpose will not be allowed to fail but the exact directions of the donor as to management of the trust may be regarded as merely directory, and, if necessary to preserve the trust and carry out the leading purpose of the donor under the cy pres doctrine, a court may apply it to a similar purpose by different means. ...

“ . . . It is true, the proof shows he had never been charitably inclined and was estranged from his children, who were all adults. We are warranted in concluding his desire was that after the life estate conveyed had terminated, the property should be used in providing a home for old men who were in need of a home. The words used in the deed were to build a home, but clearly signify his intention was to devote the property to the purpose of assisting and relieving old men. We are of opinion the court had the power cy pres to administer the trust by devoting it to a similar purpose in a way which would be of practical benefit to the objects of the charity, and should not have decreed that the trustee carry out the trust according to the terms imposed by the deed.”

This rule has been generally accepted by the courts, not alone in this country but also in England, and, as has been noted, the purpose of applying the cy pres rule was not to change the object or purpose for which the money was subscribed. The Supreme Court in passing upon a like question in Heuser v. Harris, 42 Ill. 425, said:

“The counsel for appellants claim that the court will not under the cy pres power make a disposition of this property different from that proposed by the testator. But the authorities cited show, if the mode the testator has designated is impracticable, and counsel insist it is, then the court can and will substitute another mode, cy pres or as near the one designated as may be practicable.

“The object of the bequest cannot be changed. As this court said in Gilman et al. v. Blackburn et al., 16 Ill. 225, and referred to by appellants’ counsel, the intention of the donor of a charity will control unless that is impracticable, in which case it may be altered cy pres, and that charities are administered by the courts on cy pres principles for the very purpose of sustaining and carrying into effect the intention; but they cannot change the object or place because the fund could be more judiciously and efficiently applied in another place, or to a different object. This doctrine of cy pres has no place in legacies to individuals, but, in a charity like this, there is reason and good sense in presuming, that, had the testator known the election of a trustee, in the mode he proposed, his executing bond, and to serve as such gratuitously, he would have adopted another mode, and the court must act as he himself would have done, and this is the foundation of the doctrine cy pres. An approximation to the intention of the testator, as near as possible, is all that is meant by this doctrine.”

The Attorney G-eneral contends, and we quite agree with his views, that it is not permissible to apply the fund to an organization not in existence when the fund was created or donated, and whose objects and purposes are different from the object or purpose for which the fund was created or donated. As we have stated before in our opinion, the object of the fund was determined and fixed by the appeal and the proclamation in 1927, and when these funds were contributed for the purpose of the appeal, William Hale Thompson at once became and was the trustee of such fund, and the appeal certainly cannot be construed to mean that the fund was to be used after the period of time for the relief of flood sufferers had passed to organize the defendant corporation, the Waterway and Flood Control Association of the Mississippi Valley, for the purpose set forth in its charter, which is “to devise ways and means for the prevention of floods and to promote the development and extension of the waterways of the Mississippi Valley, and to secure the passage of such legislation as may be necessary therefor. ” While the purpose of the organization may have been a proper one, still the cóurts are controlled by the doctrine laid down by courts of last resort, which is, that a fund is not to be used for any purpose other than that for which it is subscribed, and the court indicated the purpose of the fund when it directed that the amount remaining at the time of the filing of the bill be turned over to the American National Bed Cross, a corporation.

From the conclusions we have reached, the trial court erred in allowing the defendant William Hale Thompson to deduct the sum of $72,794.79 from the total amount remaining after the payment of $35,846.61 for the relief of the Mississippi Valley flood sufferers.

The decree is reversed and the cause is remanded with directions to the trial court to modify the decree heretofore entered, by charging the snm of $72,794.79 to the defendant William Hale Thompson, to be accounted for within the period of time fixed by the court and paid to the American National Red Cross, a corporation, as trustee, to be used for the relief of persons who may suffer in the future by reason of any floods that may occur in the Mississippi Valley, or for a purpose as closely related to the original purpose as may be.

Reversed and remanded with directions.

Denis E. Sullivan and Hall, JJ., concur.


text:
    Anna Svatik, Administratrix with the Will Annexed of Estate of John Krier, Deceased, Appellant, v. Harriett L. Niles et al. Harriett L. Niles, Appellee.
    Gen. No. 39,493.
    Opinion filed February 2, 1938.
    Rehearing denied February 18, 1938.
    Alice Greenacre, of Chicago, for appellant.

      Murphy, Lilliander & G-emmill, of Chicago, for ap-pellee; William B. G-emmill, of Chicago, of counsel.
   Mr. Presiding Justice Hebel

delivered the opinion of the court.

This is an appeal by the plaintiff from a judgment entered in favor of the defendant, Harriett L. Niles. This judgment is based upon a suit at law upon a 99-year lease, dated February 20,1924. The original parties to the lease were John Krier, as lessor and Paul Niles as lessee. The suit was to recover the unpaid rent in the sum of $12,500 which accrued during the lessor’s life, together with interest and attorney’s fees, brought by the lessor’s personal representative against Harriett L. ISÍiles, as an intermediate assignee and the Northwest Corner of Michigan Avenue and 112th Place Building Corporation, hereinafter referred to as “the Building Corporation,” as assignee lessee in possession at the time of default. The original lessee was not made a party to the suit, he being dead. A judgment was taken by default against the building corporation, and the case proceeded against Harriett L. Niles. The court heard the evidence without a jury. The evidence consisted of an oral stipulation of facts, documents admitted by agreement, and oral testimony introduced by the plaintiff showing the amount of rent unpaid and that $750 is a fair and reasonable fee for plaintiff’s attorney’s fees. The court found the issues against the plaintiff as to the defendant Harriett L. Niles, and a judgment was entered in favor of the defendant upon the court’s finding.

From the evidence as stated in plaintiff’s brief, it appears that the claim is upon a 99-year lease of property at the northwest corner of Michigan avenue and 112th place, in Chicago, Cook county, Illinois, from John Krier, a bachelor as lessor, to Paul E. Niles as lessee. The lease is dated February 20, 1924, and recorded, in the recorder’s office of Cook county on April 8, 1924, as document number 8353774. The lessee obligated himself to pay the rentals, taxes and special assessments, attorney’s fees, to keep the premises in repair, and, among other things, to construct a new building. The lease contains provisions concerning assignment and the terms and conditions thereof. The conditions of assignment set up include provisions that there be no default at the time of the assignment; that the “assignee or assignees shall expressly accept and assume all the terms and covenants in this lease contained to be kept, observed and performed by the Lessee, and become bound to personally comply therewith. ...” It is provided that assignment shall relieve the lessee (assignor) of further personal liability if the building has been completed, “it being expressly agreed that in the event of any assignment of this lease prior to the erection of and full payment for a building or buildings on said demised premises as by Article fifth of this lease provided the Lessee shall remain personally and primarily liable under the covenants of this lease until there shall be erected upon said premises and fully paid for, a building or buildings as by Article five of this lease provided.”

The lease also contains a provision that all covenants, agreements, conditions and undertakings thereof shall extend to and be binding on the heirs and assigns of the respective parties thereto, the same as if they were in every case named and expressed, and shall be construed as running with the land, and that wherever reference is made to either party it shall be held to include and apply to also the successors and assigns of such party the same as if in each and every case so expressed.

Paul E. Niles assigned the lease to Harriett L. Niles by assignment dated September 27, 1924, recorded in the recorder’s office of Cook county, Illinois. This assignment recited that Paul E. Niles sold, granted, conveyed, assigned and set over to Harriett L. Niles a “certain Indenture of Lease, bearing date the 20th day of February, 1924, made by John Krier, a bachelor, of Chicago, Illinois, party of the first part, and Paul E. Niles, of the City of Chicago, and State of Illinois, party of the second part, together with all and singular the premises therein mentioned and described and the buildings thereon, with the appurtenances . . . from the 27th day of September for and during all the rest, residue and remainder yet to come of and in the term of 99 years mentioned in the said Indenture of Lease.” This assignment does not further describe the lease or the premises, but does provide that the same is “subject to the rents, covenants, conditions and provisions therein also mentioned.” Paul E. Niles alone executed the first assignment. Thereafter Harriett L. Niles further assigned said 99-year lease to the building corporation, by a written assignment dated June 29, 1926, recorded in the recorder’s office of Cook county on July 1, 1926, as document 9325897. This assignment to the building corporation is executed by both Harriett L. Niles and the building corporation. In it it is recited that Harriett L. Niles, defendant, is the owner and holder of a leasehold interest in the said premises and the legal description is set out in detail; the 99-year lease is further described by reference to its date, the date of its recording and the recorder’s document number, the parties to it, and its term. Reference is expressly made to the lease and the record thereof. It is provided that Harriett L. Niles does — “Sell, assign, transfer, convey and warrant all her right; title and interest in and to the aforesaid real estate and the above mentioned leasehold estate created therein, (subject, however, to all and every the covenants, conditions and agreements contained to be performed by the lessee named in said lease, which said lease the said party of the second part hereby assumes and agrees to fully observe, perform and execute the same as if it had been originally the party lessee thereto).” Further, the building corporation agrees that it — “will accept and assume all the terms, covenants, obligations and agreements in said lease contained to be kept, observed and performed by the lessee therein, and in all things will save and keep harmless the said party of the first part herein (Harriett L. Niles) from all costs, damages and expenses by reason thereof in the future.”

It further appears from the statement of facts that from the time of the assignment from Mr. Niles to Mrs. Niles up to the assignment from Mrs. Niles to the building corporation, Mrs. Niles was in possession and paid all accruing rent instalments. After the assignment to the building corporation it took possession and paid all rents for a time. The rental for the period sued on was $10,000, payable in quarterly instalments of $2,500 each on the 1st day of January, April, July and October of each year. The last rent paid was the instalment due January 1,1931. No building has ever been erected on the premises as provided in the lease. The lessor John Krier died on March 30, 1932, and letters of administration with the will annexed were issued to the plaintiff Anna Svatik on June 13, 1932. Recovery is being sought for four unpaid rent instal-ments of $2,500 each, due on the 1st day of April, July and October, 1931 and of January, 1932. All of the instalments for which recovery is sought by the plaintiff against the defendant Harriett L. Niles accrued while the building corporation enjoyed the benefit of the premises and during the lifetime of the lessor John Krier. The evidence tends to establish that $750 is a fair and reasonable fee for plaintiff’s attorney’s fee.

From the briefs filed by the parties in this action the facts seem to be undisputed except as to the amount of the rent claimed. The plaintiff suggests that where a document contains provisions and conditions to be binding on persons having the benefit thereof, and a person accepts said document or the contract thereby evidenced., her acceptance is to be considered with reference to the assumption of contractual obligations the same as if she had signed a contract to perform said provisions and conditions, and contends that the sole question in the instant case is whether effect shall be given to the provision of the 99-year lease that any assignee shall be personally bound the same as if'an original party, and that any assignee shall, as a condition to the validity of the assignment, accept all thé terms and covenants of the lease and shall become personally bound to comply therewith. One of these covenants is the payment of the rental of $10,000 per year.

Defendant’s answer to the plaintiff’s contention is that the language of the original lease declares that any assignment made contrary to the provisions thereof shall be void. If the assignment was void, Harriett L. Niles was merely a tenant at will and certainly not responsible for rent accruing subsequent to her surrender of possession.

It is further contended by the defendant Harriett L. Niles that she is not liable except for rents accruing during her tenure, because the assignment to her did not contain express words of assumption of personal liability. In support of this theory, the distinction between privity of contract and privity of estate appears in the record to have been urged upon the trial. Plaintiff states that apparently defendant relies upon the line of cases which do hold that where an original lease stipulates a given rental and an assignment is made subject to the terms of the lease but without express provision for assumption of personal liability by as-signee, in either the lease or the assignment, then the assignee lessee is liable only by privity of estate and only for rents accruing during Ms tenure and is not liable for rents accruing after a further assignment of the leasehold.

The question then Mnges upon the construction of the provision of the original lease as to whether the lessee’s assignee has made herself personally liable. It is admitted by all the parties that the defendant Harriett L. Niles did not sign the 99-year lease, nor the assignment thereof to her, but by accepting possession she accepted the benefits of both lease and assignment. The question arises whether by the acceptance of the benefits, as well as possession she is liable for the rent accrued for which this action was brought.

Let us again consider the language of the assignment of the lease that was accepted by Harriett L. Niles. The condition of the assignment to the defendant Harriett L. Niles contains this language: “such assignee or assignees shall expressly accept and assume all the terms and covenants in this lease contained to be kept, observed and performed by the lessee, and become bound to personally comply therewith. ’ ’

In a case entitled Johnston v. Messinger, 226 Ill. App. 397, somewhat like the one here being considered, and in which the Appellate Court passed upon the very question involved in the instant case, where the assignee did not sign an assignment of the lease whether the assignee was bound by the terms and conditions of the lease. The court in part said:

“Plaintiffs’ claim is made up of items accruing under the lease after the assignment from Messinger to Hagen. The trial court apparently being of the opinion that as Messinger had not signed the instrument of assignment from Donnell Safe Company to him, there was no privity of contract between the lessors and Messinger and, after the assignment to Hagen, no privity of estate and therefore no basis for the liability of defendant claimed by plaintiffs.

“We hold that Messinger, by privity of contract, assumed the obligations of the lease and was liable for their performance. The mere fact that Messinger did not sign the instrument of assignment from the Donnell Safe Company to him does not necessarily release him from its covenants. If he did anything indicating that he accepted it, he thereby assumed its obligations. . . . His signature to this document would amount to no more than evidence of his acceptance of the same, and this acceptance may be shown in other ways. . . . Acceptance is to be considered with reference to the assumption of contractual obligations, as the equivalent of signing the contract. Worden v. Sharp, 56 Ill. 104; Kershaw v. Kershaw, 102 Ill. 307; McFarlane v. Williams, 107 Ill. 33; Dean v. Walker, 107 Ill. 540; Webster v. Fleming, 178 Ill. 140; Springer v. DeWolf, 194 Ill. 218; Sanitary Dist. of Chicago v. Chicago Title & Trust Co., 278 Ill. 529; 2 Coke’s Littleton, 230 b, sec. 374; 1 Shepard’s Touchstone, 177; 3 Preston Abstracts, 61; Cherry v. Hemming, 4 Exch. 631; Challis Real Prop. (3rd Ed.) 404.”

The case we are here considering differs from the cases of Johnston v. Messinger, supra and Springer v. DeWolf, 194 Ill. 218, in that in both of those cases prdvision for the assumption of personal liability as assignee was contained in the assignment, which was not signed by the assignee, and in this case is contained in the original lease, title to which was acquired by the ■ assignee through assignment, although this assignment was not executed by her. The fact is, however, that the assignee in the instant case acquired title to the premises and accepted and assumed all of the provisions of the original lease by virtue of this assignment. By taking possession and occupying the premises the defendant is bound by the provisions of the lease in question. As we have indicated, this lease was recorded in the recorder’s office and, of course, the defendant in this action had knowledge and is chargeable with notice of the provisions and conditions of the lease, and no contention seems to have been made by the defendant that she did not have such knowledge.

One of the defenses urged here is that if the assignment fails to comply with the terms of the lease, then the lessor may forfeit such attempted assignment and has a right to take possession of the premises. The lessor, however, may waive a breach of the restriction in question, and it must be conceded that by assignment title to the estate passes to the assignee, and having acquired title she was entitled to possession and, therefore, assumed the obligations contained in the lease and is bound thereby.

The case of Springer v. Chicago Real Estate Loan & Trust Co., 102 Ill. App. 294, is called to our attention by both litigants. In that case the court said: “Nor are we of the opinion that a landlord in case of an attempted assignment by a lessee of a lease containing a restriction against assignment must either acquiesce in the attempted assignment and recognize it as valid, or proceed to forfeit for violation of covenants. . . .

“That an invalid assignment is not void but voidable only, that is, that a landlord may waive the restriction inserted for his benefit, is undoubtedly the case (Webster v. Nichols, 104 Ill. 160), but a landlord, although he may have a right so to do, is not bound to declare a forfeiture for breach of a covenant; on the contrary, he may insist upon a tenant fulfilling his obligations. ’ ’

There is also a question as to lack of evidence to establish the amount due under the terms of the lease. This is unfounded, for it appears from the record that there is sufficient evidence to justify the trial court in fixing the amount due the plaintiff.

After consideration of all the questions involved in the record, we are of the opinion that the court erred in entering judgment for the defendant; therefore the judgment is reversed and judgment is entered against the defendant in this court for $10,750.

Reversed and judgment here against defendant for $10,750.

Denis E. Sullivan and Hall, JJ., concur.


author: Mr. Presiding Justice Hebel Denis E. Sullivan, J.,

text:
    The First National Bank of Chicago, Appellee, v. John F. Lindberg et al., Defendant. Appeal of Edward F. O’Brien, Appellant.
    Gen. No. 39,527.
    Denis E. Sullivan, J., dissenting.

      Opinion filed February 2, 1938.
    Lloyd C. Whitman, of Chicago, for appellant.
    Harold V. Amberg, Packard, Barnes, McCaughey & Schumacher and Winston, Strawn & Shaw, all of Chicago, for appellee; Thomas B. G-ilmore, Walter H. Jacobs and Reuben A. Borsch, all of Chicago, of counsel.
   Mr. Presiding Justice Hebel

delivered the opinion of the court.

This is an appeal by the defendant Edward F. O’Brien, who seeks a reversal of the decree of foreclosure entered by the court on February 15, 1937, in the above entitled cause. The decree was enteréd on a master’s report, on the amended and supplemental bill of the First National Bank of Chicago, filed on January 27, 1934, to foreclose a trust deed in which the Union Trust Company is named trustee of the property described therein, and of which O’Brien is now the owner. The trust deed was executed on December 15, 1926, by John F. and Ida J. Lindberg, the then owners of the property, to secure the payment of $76,000 of bonds executed by them.

On March 28, 1933, the First Union Trust & Savings Bank, an Illinois corporation, formerly the First Trust & Savings Bank, successor in trust by consolidation to the Union Trust Company, as trustee under said trust deed from John F. and Ida J. Lindberg of December 15,1926, filed a hill to foreclose. On January 27, 1934, the First National Bank of Chicago filed a petition reciting that it is a national banking association and charging that on July 17, 1933, the original complainant, First Union Trust & Savings Bank, consolidated with the First National Bank of Chicago under the latter’s charter and under the corporate title “The First National Bank of Chicago,” and that by virtue of the consolidation and the provisions of the United States Code, Title 12, the corporate existence of First Union Trust & Savings Bank was merged into and continued in the First National Bank and thereby the First National Bank became the trustee under said trust deed, and asking leave to file an amended and supplemental bill and for leave as trustee to continue prosecution of the suit. On the same day, the First National Bank filed its amendment and supplement to the bill of complaint, making the same allegations as in its petition of that date.

On March 19, 1936, the defendant O’Brien answered the bill as amended and supplemented and denied that the First Union Trust and Savings Bank was duly consolidated with the First National Bank denied that by virtue of that alleged consolidation, or otherwise, the First Union Trust & Savings Bank was merged into and continued in the First National Bank and denied that the First National Bank became or is the trustee under said trust deed. The matter was referred to a master, who filed his report, to which the defendant filed objections, which were overruled by the master and ordered to stand as exceptions to the master’s report.

The master reported and the chancellor found and decreed that the First Union Trust & Savings Bank was lawfully and effectively consolidated with the First National Bank of Chicago, which thereby became successor trustee under the trust deed and owner and holder of $4,000 of the bonds secured by the trust deed.

While the foreclosure proceeding was pending, the complainant First Union Trust and Savings Bank was consolidated with the First National Bank of Chicago under and by virtue of the act of Congress of February 25, 1927, as amended by act of June 16, 1933, generally known as the “McFadden Act,” and upon the entry of the decree herein, the court made this finding:

“The court further finds that on July 17, 1933, the said First Union Trust and Savings Bank was, pursuant to the provisions of an Act of Congress providing, among other things, for the consolidation of state banks with national banting associations, approved November 7, 1918, as amended February 25, 1927, and June 16, 1933, duly consolidated with The First National Bank of Chicago, a national banking association, under the charter of such national banking association, and on July 17, 1933, the Comptroller of the Currency of the United States issued a certificate dated July 17, 1933, certifying that The First National Bank of Chicago and the First Union Trust and Savings Bank had been consolidated under the charter of The First National Bank of Chicago under the corporate title ‘The First National Bank of Chicago ’, and that such consolidation was thereby approved, and thereupon said consolidation became effective; that said consolidated banking association has received and now holds a special permit from the Federal Reserve Board, upon due application theretofore made to it, granting to said consolidated banking association the right, among other things, to act as Trustee, Executor, Administrator, Guardian of Estates, Committee of Estates of Lunatics, or in any other fiduciary capacity in which state banks, trust companies, or other corporations which come into competition with national banks in the State of Illinois, are permitted to act under the laws of said State; that said consolidated banking association has received and now holds a certificate from the Auditor of Public Accounts of the State of Illinois showing that it has the right to accept and execute trusts under the name of ‘The First National Bank of Chicago, ’ and that at all times since said consolidation said consolidated banking association has been, and it now is, duly qualified under the laws of the United States and the laws of the State of Illinois, to accept and execute trusts under the name of ‘The First National Bank of Chicago’; that by virtue of said consolidation and the statutes aforesaid, the corporate existence of the First Union Trust and Savings Bank was merged into and continued in The First National Bank of Chicago, and all of the rights, franchises, titles, powers and privileges which were vested in the complainant herein under its name of First Union Trust and Savings Bank before and at the time of such consolidation, including the right to act as Trustee under the said trust deed from John F. Lind-berg and Ida J. Lindberg, his wife, dated December 15, 1926, continued in and have become and are now vested in and possessed by The First National Bank of Chicago, said consolidated banking association, the complainant herein.”

It is the theory of the defendant and he presents and seeks to demonstrate that the First Union Trust & Savings Bank was without power to pass its trusteeship to the First National Bank of Chicago by consolidating with the complainant, a national banking association; that the outstanding and controlling question in this case is as to the powers of the First Union Trust & Savings Bank, under the Illinois statutes, and whether the consolidation of these banks is legal.

The answer of the plaintiff is that the validity of the consolidation cannot be attacked collaterally but only in a direct proceeding by the public authorities of the State of Illinois or of the United States, and further, that the consolidation of the State bank and the national bank was effected under the Federal statute of February 25, 1927, as amended June 16, 1933. From the pertinent parts of the statute the plaintiff quotes as follows:

“Any bank incorporated under the laws of any State, or any bank incorporated in the District of Columbia, may be consolidated with a national banking association located in the same State, County, City, town or Village under the charter of such national banking association on such terms and conditions as may be lawfully agreed upon . . . (here follows mechanics of such a consolidation). Upon such a consolidation . . . the corporate existence of each of the constituent banks . . . participating in such consolidation shall be merged into and continued in the consolidated national banking association and the consolidated association shall be deemed to be the same corporation as each of the constituent institutions.

“No such consolidation shall be in contravention of the law of the State under which such bank is incorporated. ’ ’ and said that while there is no statute of the State of Illinois, and therefore no public policy of the State, against the consolidation of a State bank with a national bank, it follows that the Federal statute occupies the field and confers the authority for the consolidation. Upon this question the Massachusetts court held: “. . . there has been no exercise of whatever power may reside in the State to declare a general policy against the consolidation of a state trust company with a national bank. Thereby in effect, that field is left open to the exercise by Congress of whatever power it possesses over that subject.” Ex parte Worcester Countv National Bank, 162 N. E. 217 (Mass.) (p. 220). '

Upon a like question our Supreme Court in Fiedler v. Eckfeldt, 335 Ill. 11, said:

“It is a proposition too firmly established and too well known to require the citation of authority, that the legality of the existence of a corporation cannot be inquired into collaterally but only in a direct proceeding by the State upon an information in the nature of quo warranto — and this applies to corporations de facto as well as corporations de jure. In an action purporting to be brought by a corporation the plaintiff is not required, even upon a plea of nul tiel corporation, to prove more than a de facto existence. This doctrine arises from the necessity of the case and the interest of the public in the stability and validity of business transactions with corporations. The rights and franchises which may have been usurped by a de facto corporation are the rights and franchises of the sovereign, who alone has the rights to interpose, and until he does so the exercise of corporate powers under color of law must be regarded as rightful. Although an association may not be able to justify itself when called on by the State to show by what authority it assumes to be and act as a corporation, yet for reasons of public policy no one but the State will be permitted to call in question the lawfulness of its organization.”

In the case of Hudson v. Green Hill Seminary Corp., 113 Ill. 618, a plea of nul tiel corporation was filed in an action of assumpsit brought by an Indiana corporation which was organized, or attempted to be organized, under an act of the legislature of that State, entitled “An act for the incorporation of high schools, academies, colleges, universities, theological institutions and missionary boards.” The Supreme Court said:

“Conceding that . . . it is incompetent for the legislature to render the corporation absolutely legal and valid in all respects, about which we express no opinion, still the authority to inquire, by quo warranto, whether, there being a corporation de facto, it is, in all respects, a legal and valid corporation, belongs to the State of Indiana alone. If that State does not choose to institute such a proceeding, and oust it of its assumed franchise, no one else can do so. ’ ’

From the authorities on the question up to this point it is clear that there is but one way to test the question of the legality of the existence of a corporation and its powers, and that is by an action in the nature of quo warranto, which, in this State, must be instituted by the Attorney General of Illinois.

It does not appear from anything called to our attention that it was necessary to specifically authorize the consolidation of a State bank with a national bank to give effect to the powers and authorities conferred by the national act. Therefore, in the absence of a State statute prohibiting such consolidation, the national act applies and is the basis of the authority for the consolidation.

From the record it appears that the consolidation became effective on July 17, 1933, since which time the bank, with the approval of the comptroller of the United States and the auditor of Illinois, has accepted and executed many trusts. Public moneys of the State, counties and other municipalities have been deposited in it and the consolidated association has conducted a banking business involving many transactions with its depositors, and with the public generally, all of which transactions have been with the acquiescence of the public authorities, both of the State and the national government.

The defendants do not agree with the theory as we have outlined it, nor do they agree that the merit of their cause is controlled by the case of Casey v. Galli, 94 U. S. 673. From the facts in this case it appears that a receiver of a national banking association brought suit to enforce the individual liability of the defendant as a stockholder of the institution. The defendant pleaded in part that the association had no existence because the Bank of New Orleans, a State bank, had no power by its charter, nor authority otherwise from the State of Louisiana, to change its organization into that of a national banking association under the laws of the United States. On the question of the collateral attack on the organization of the New Orleans National Bank the court said: “The comptroller was clothed with jurisdiction to decide as to the completeness of the organization, and his certificate is conclusive upon the subject for all the purposes of this litigation.

“It has the same effect, and for the same reason, as his determination and order with respect to the amount to be collected from each stockholder in the event of the failure of the association. No question can be raised in this collateral way as to either. ’ ’

The defendants answer by saying that in Hopkins Fed. Sav. & Loan Ass’n v. Cleary, 296 U. S. 315, the United States Supreme Court refers to Casey v. Galli, 94 U. S. 673, and call our attention to the conclusion of the court wherein it is said: “. . . all that was said in Casey v. Galli as to the condition of consent was unnecessary to the decision if it was meant to do more than define the meaning of the statute.”

It is to be noted, however, that in the attack made upon the consolidation of a Federal Building and Loan Association with a like association incorporated under the laws of the State of Wisconsin, the attack was made by the banldng commission of the State, which appears from a reading of Hopkins v. Cleary, 296 U. S. 315.

The United States Supreme Court in Hopkins Fed. Sav. & Loan Ass’n v. Cleary, supra, from which case we have quoted, commented on the facts in Casey v. Galli, 94 U. S. 673, which is interesting as the facts in that ease have an important bearing upon the facts in the instant case. This is what the court said:

“Much reliance is placed in behalf of the petitioners upon the decision of this court in Casey v. Qalli, supra. The Bank of New Orleans, a Louisiana corporation, became a national banking association by vote of its stockholders. The state did not oppose the conversion, though it was not shown to have consented. The recognized corporation did business for more than two years, when it failed and a receiver was appointed by the Comptroller of the Currency. In an action by the receiver against a shareholder to enforce the individual liability under the provisions of the federal statute, the defendant filed three pleas in abatement, to which the plaintiff demurred. The pleas were as follows: (1) Nul tiel corporation; (2) that there was not then, nor when the plaintiff became receiver of the New Orleans Banking Association, any such corporation in existence, because the Bank of New Orleans had no power under its charter, nor authority otherwise from the State of Louisiana, to change its organization to that of a national banking association under the laws of the United States; and (3) that there had been a failure to comply with the statutory conditions as to the method of conversion if conversion was permissible. The first plea was abandoned, and the third is without bearing upon the cause now before us. The court sustained the demurrer to the second plea upon two independent grounds, which will be stated inversely to the order in which they appear in the opinion. Thus stated they are these: (a) The defendant was estopped from contesting the validity of the change after standing by for over two years without making his objection known; and (b) apart from any estoppel, ‘no authority from the State was necessary to enable the bank so to change its organization.’ p. 678. ‘The act is silent as to any assent or permission by the State. It was as competent for Congress to authorize the transmutation as to create such institutions originally.’ Ibid.

“No question of constitutional power was in the case, for nowhere in the record did the defendant invoke the Tenth Amendment or the Fifth or any other provision of the Federal Constitution. The substance of the plea was this, that the change from one form of association to another was to be condemned as ultra vires. The meaning of the statute was thus the pivot of the controversy. The argument in the briefs was directed in the main to the formal correctness of the pleadings, the validity of the act being taken for granted. The assumption was one that could hardly be avoided when the controversy was viewed in the setting of the facts. Louisiana, like the defendant shareholder, had apparently acquiesced in the attempt of the central government to take over the state banks. The time had gone by to vindicate her majesty. What she might have done if she had been vigilant is a question not before us. Distinctions may conceivably exist between the power of the Congress in respect of banks of issue and deposit and its power in respect of associations to encourage industry and thrift. Whether that be so or not, all that was said in Casey v. Galli as to the condition of consent was unnecessary to the decision if it was meant to do more than define the meaning of the statute. ’ ’

It is apparent from the record in the case before us that no objection was made by the officials of the United States or of the State of Illinois to the consolidation of the banks at the time the consolidation took place. Therefore, it would seem to us that the proper procedure would be for the Attorney General of the United States, or the Attorney General of this State to question the legality of the consolidation that took place when the banks were merged. Constitutional questions are not involved, and could not be considered by this court in determining the issues.

A further important question in this case is whether the First National Bank of Chicago was properly substituted as the plaintiff in this cause by reason of its consolidation with the First Union Trust & Savings Bank, an Illinois corporation. The defendant Edward F. O’Brien acquired title to the property in question, which was subject to a trust deed to secure the payment of $76,000 of bonds executed by John F. and Ida J. Lindberg, the former owners of the property.

As we have before stated, the question is whether the plaintiff bank was consolidated with the First Union Trust & Savings Bank and authorized by law to carry on this litigation.

The purpose of this foreclosure was to join with the holders of bonds in the bill filed to foreclose the trust deed. The only relief asked was that the court enforce the securities by its own methods, through its own officers and by virtue of its jurisdiction, and was not the exercise of an active trust or power by the trustee. Even if active duties were required of the trustee, still the original makers of the bonds are liable for the amount signed by them, and the trust deed given to secure the payment would not be invalidated because the trustee was incapable of acting, as claimed by the defendant.

The consolidation required by law to make it effective is for the protection of persons interested in the proper execution of the trust, and does not authorize fraudulent conduct in giving security and then repudiating it.

A case having material bearing on the question to be decided here is that of Morse v. Holland Trust Co., 184 Ill. 255, where it appears from the facts as they are stated in the opinion that the law requiring foreign trust companies to deposit securities with the auditor of this State is designed to protect persons interested in the proper execution of trusts, and not to furnish ground for fraudulent conduct in giving security and then repudiating it, and failure of a foreign trust company to deposit securities with the auditor of public accounts does not invalidate a decree foreclosing a trust deed executed to it as trustee, to secure the payment of bonds. The language used by the court in that case is:

“The objection made to the decree of foreclosure is, that it is erroneous because the Holland Trust Company, a corporation created by the laws of another State, could not accept an active trust without first depositing securities with the Auditor of Public Accounts, and could not acquire or hold title to the real estate in question under the trust deed. It will, of course, be conceded that the foreign corporation co.uld not perform the duties of an active trust, since it had not complied with the statute. But that question is of no importance in the present attitude of the case. Even if active duties were required of the trustee, we apprehend that no one would be found to say that the Central City Brick and Tile Company is not liable upon its bonds regularly issued, in accordance with the resolution of the corporation, for the purchase price of the real estate, nor that the security taken would be invalid merely because the trustee was incapable of acting. The law requiring a deposit of securities is enacted for the protection of persons interested in the proper execution of trusts, and not to authorize such fraudulent conduct as the giving of security and then repudiating it. The law would never work such a wrong when it is within its power to remove the trustee who is disqualified and appoint one who can act. . . .

“The only thing done by the trustee was to certify to the bonds in the State of New York, and this did not involve anything but the identification of the bonds in the manner provided in the trust deed. It was the same thing that had been done in the case already cited, and did not involve the exercise of any active duty or trust in this State. The only other act of the trustee was to join with the holders of bonds in the bill filed to foreclose the trust deed. This was only a prayer to the court to enforce the securities by its own methods, through its own officers and by virtue of its jurisdiction, and was not the exercise of an active trust or power. The trustee might properly have been made a defendant. Upon filing the bill it had nothing more to do, but laid down its trusts and powers and left the court to enter and execute its own decree. The title to be acquired under a sale would come through the decree of the court. . . .

‘ ‘ There was no occasion for the removal of the trustee in this case or the appointment of a new one, since the foreign trustee came into court asking to be divested of its title by a decree and sale. Our decisions recognize the doctrine that a non-resident trustee in such a case acquires some interest under the trust deed, and that a subsequent compliance with the law will enable such trustee to carry out its provisions. ’ ’

That authority is apt for its reasoning, and is an authority which justified the foreclosure proceeding in the instant case. Here as in the other authorities cited, a foreclosure proceeding has been filed by a trustee to foreclose the equity of redemption of the defendant. There as here the authority of the trustee to act was questioned, the reason being that the trustee corporation was not properly qualified to act in this State. The Supreme Court holds, and justly so, that such a defense by the defendant is fraudulent and that the defendant seeks to avoid the payment of the amount due secured by the trust deed in order to relieve the property from a lien.

The case entitled Morse v. Holland Trust Co., supra, was authority for the plaintiff trustee to act by filing the bill to foreclose, and in doing so, the trustee prayed that the court grant the relief prayed for, which would, in effect, relieve the plaintiff from further acting as trustee, and would divest plaintiff’s title as such trustee by a decree of foreclosure. The decree here is affirmed.

Decree affirmed.

Hall, J., concurs.

Denis E. Sullivan, J.,

dissenting:

I cannot agree with the decision reached in the majority opinion for the following reasons:

I do not believe that the answer of the defendant is a collateral attack upon the consolidation of the plaintiff for the reason that the plaintiff puts such consolidation in issue by alleging it in its bill.

I do not believe that we have as yet arrived at the point where the Federal government has the right to take over Illinois corporations and legislate concerning their charter rights and consolidation without the State of their creation giving its affirmative consent. As to the comptroller issuing a certificate to this so-called consolidated bank to do business, I do not believe a bureaucratic permission to continue in business should create a rule of construction to be followed by the State courts to the extent of preventing an investigation of the facts and law governing such act of consolidation.

I do not believe a trustee can sell the assets of its trust for a consideration and relieve itself of its obligations without the consent of the beneficiaries or the finding and direction of a court after hearing.


text:
    Dorothy M. Slezak, Appellant, v. Joseph C. Slezak, Appellee.
    Gen. No. 39,616.
    Opinion filed February 2, 1938.
    William C. Scherwat and George R. Katzmann, both of Chicago, for appellant.
    No appearance for appellee.
   Mr. Presiding Justice Hebel

delivered the opinion of the court.

This is an appeal by the plaintiff, after the entry of a final decree of divorce, from an order overruling and denying plaintiff’s petition and an amendment and supplement thereto praying that reasonable attorney’s fees be taxed against the defendant, incurred in proceedings to enforce the alimony payments provided for in said decree, the necessity for which enforcement proceedings is directly attributable to defendant’s contemptuous refusal to pay.

In discussing this case we are without the benefit of the defendant’s theory, for the reason that he has failed to appear in this court and file a brief to aid the court in arriving at a conclusion that the court was justified in refusing to tax as costs the amount prayed for in plaintiff’s petition as reasonable attorney’s fees to be taxed against the defendant upon the ground urged in the petition.

The plaintiff’s contention in this court is that a chancery court retains jurisdiction to enforce its alimony orders and decrees, and consequently has jurisdiction to enter an order for an allowance of attorney’s fees to the plaintiff necessarily occasioned by reason of the defendant’s contemptuous noncompliance with the decree of divorce entered by the court.

A decree of divorce was entered on August 17, 1935, in favor of the plaintiff upon the findings of the court that there were no children born to said parties as a result of the marriage and further that the defendant was guilty of extreme and repeated cruelty, and providing that the defendant, among other things, pay the plaintiff the sum of $500 in payments of $20 on the 7th and 22nd of each month, commencing August 22, 1935.

It further appears from the decree filed in this case that after the entry of the decree, although continuously earning upwards of $200 per month, the defendant wilfully failed to make payments as they became due, and then only paid as a last resort after the plaintiff had sought to compel the enforcement of the decree by petitions for rules to show cause and the repeated entries of the necessary rules and orders thereon. To so enforce the decree the procedure became repeatedly necessary to secure these alimony payments. In the presentation of the several petitions and the ruling of the court thereon it became necessary for the plaintiff to employ counsel to enforce the decree of the court. The plaintiff thereupon filed a petition and a supplemental and amended petition praying for an allowance of attorney’s fees to meet the necessary expense incurred by reason of the defendant’s failure to comply with the order of the court.

In order that the defendant may be forced to make payments of alimony provided for in the decree, citations may be issued by the court after the proper service of notices, petitions for rules to show cause why defendant should not be held in contempt, hearings on the return of the rules, attachments upon nonappearance of the defendant and finally commitment in cases of persistence in the refusal to comply. In order to compel the defendant to comply with the orders of the court, as we have stated before, it became necessary for the plaintiff to employ an attorney, and the attorney’s fees incurred, being proximately attributable to defendant’s default, should as a matter of course be taxed against the defendant as a penalty for failure to perform the duty required of him by the findings of the court in its decree.

This court upon a like question,in the case of Czarra v. Czarra, 128 Ill. App. 430, said:

“Among the cases brought to our attention by the respective arguments of counsel, nothing seems to us more in point than Stillman v. Stillman, 99 Ill. 204. If it be within the power of a court under the statute (chapter 40, section 15 of the Revised Statutes) to allow solicitor’s fees incurred in resisting a petition of a divorced husband for the reduction of alimony, we see no reason in principle or under the terms of the statute why it should not be so allowable in the case of the prosecution by the divorced wife of her right to enforce alimony.”

It would be absurd to hold that the court by the provisions of the Divorce Act could modify a decree of divorce which had been entered and make such changes as equity and good conscience dictate, but that the court in the enforcement of its orders is' helpless for the reason that the wife would be compelled to advance all expense money necessarily entailed by virtue of her effort to compel the divorced husband to perform his duty as directed by the court in its order.

We approve what was said in the case of Czarra v. Czarra, above quoted, and we are of the opinion that the court erred in not malting proper allowance as prayed for by the plaintiff in this action.

By section 5 of Rule 60 of the rules of the superior court, it is provided:

“It shall be the duty of the solicitor appearing for any woman plaintiff in whose favor an order or decree for alimony or separate maintenance has been entered, to render such service as may be necessary to enforce such order or decree when so directed by the Court, and this without reference as to whether or not compensation is likely to be had for such services.”

This rule does not meet the situation before this court for the reason that we must assume that the facts appearing in the record are true; that the defendant in this action was wilful in his disobedience of the order of the court, and thereby compelled his former wife to employ counsel to enforce obedience, which entailed expense that should be borne by the defendant. From the facts as they appear in the record we believe the court should have entered an order allowing solicitor’s fees for the work made necessary by the failure of the defendant to obey the decretal order.

The order is reversed and the cause is remanded with directions that the. court enter an order for the expense necessarily entailed in the enforcement of the decree of divorce.

Reversed and remanded with directions.

Denis E. Sullivan and Ross C. Hall, JJ., concur.