text:
    Lion Oil Company, Appellee, v. Sinclair Refining Company, Appellant.
    Gen. No. 32,903.

      Opinion filed February 27, 1929.
    Rehearing denied March 19, 1929.
    Warren Pease and William R. Allen, for appellant; Roy T. Osborn, of counsel.
    Charles E. Carpenter, for appellee.
   Mr. Justice Wilson

delivered the opinion of the court.

The Lion Oil Company, a corporation, plaintiff, brought its action against the Sinclair Refining Company, a corporation, defendant, in an action of trespass on the case for slander through its servants and agents, charging that, by reason of slanderous utterances, the business of the plaintiff was greatly injured and damaged. The trial resulted in a verdict by a jury in favor of the plaintiff, assessing plaintiff’s damages at the sum of $100,000, upon which judgment was entered and it is from this judgment that this appeal is perfected.

From the facts it appears that the Lion Oil Company was a corporation organized and existing under the laws of the State of Illinois with an authorized capital at the time of the trial of $150,000. It was engaged in the manufacture and sale of lubricating oils and greases for automobiles and trucks and in the spring of 1925 undertook to sell and distribute gasoline to the. trade and particularly to filling stations. The plaintiff’s principal place of business was located on Normal boulevard in Chicago near 58th street and it occupied a building approximately 379 feet by 250 feet, in which was located tanks and other equipment used in compounding oils and greases. It appears also that upon the premises there were storage tanks for gasoline with a capacity of 225,000 gallons and a switch track of sufficient length to contain twelve tank cars at one time.

It appears that the branch of the plaintiff’s business pertaining to the sale of gasoline grew rapidly until the plaintiff had as customers approximately twenty filling stations in and about the City of Chicago, selling “Lion” gasoline and advertising the “Lion” brand of gasoline upon the premises. These customers were supplied from tank wagons belonging to the plaintiff and it also appears that, in addition to these gasoline stations, plaintiff had certain garage and tank wagon customers. The gasoline was procured by plaintiff from the Mid-Continent Petroleum Company and the Gosden Gasoline Company in tank-car lots, averaging approximately one tank car a day.

Among the filling stations supplied by the plaintiff was the Kimball station which in March, 1926, just prior to the happening of the alleged slanderous statements made by the agents of the defendant in regard to the business of the plaintiff, purchased approximately 5,000 gallons of gasoline a month. The Sauerwein filling station, at or about the same time, was purchasing approximately 5,600 gallons per month. The Stier & Hoyle station was purchasing from the plain-. tiff and selling approximately 5,300' gallons of gasoline per month. The Karlsberg station was buying and selling as high as 7,300 gallons of gasoline. The Hartman filling station bought and sold approximately 13,000 gallons.per month. George E. Bay was operating a station where he sold approximately 45,000 gallons per month, all of which were purchased from the plaintiff company. A man by the name of Citro was operating three stations and handling the gasoline of the plaintiff and used approximately 50,000 gallons a month in these three stations.

These stations were customers of the plaintiff and in addition to these there were a number of others, bringing the total number to approximately 20 buying, selling and handling gasoline of the plaintiff. From the facts in evidence it would appear that a fair estimate would show that these filling stations were handling 150,000 gallons of “Lion” gasoline a month.

In addition to the handling of the gasoline of the plaintiff, these filling stations were also handling and dealing in its oils and lubricants. The defendant, the Sinclair Refining Company, a corporation, was also engaged in the business of selling oils, lubricants and gasoline, and maintained an office in the City of Chicago and employed a number of salesmen for the purpose of disposing of its products.

Among others, defendant had in its employ a man by the name of Baltes, who appears to have had the title of city sales manager and also assistant district manager. On or about January 29, 1926, there was a meeting of the salesmen of the defendant company held. in the City of Chicago at which there were about twenty-five salesmen present, including 8 or 10 whose particular duties were to sell gasoline in bulk, particularly to filling stations in the City of Chicago. At this meeting Baltes presided and delivered a sales talk to those present to the effect that it was necessary for them to get out and increase the sales of the defendant company. There is testimony in the record that at this meeting Baltes stated that the “Lion” Oil Company was on its last legs and would be unable to supply its customers with gasoline and told the salesmen to go out and concentrate on the “Lion” accounts. Baltes admitted on cross-examination that he mentioned the name of the Lion Oil Company, but only casually, and that he laid no particular stress upon the fact that the Lion Oil Company was going out of business and denied that he stated at the meeting that the Lion Oil Company was failing, or words to that effect.

It does appear, however, that shortly after this meeting a number of the customers of plaintiff were approached by salesmen of the defendant company and were told that the Lion Oil Company was bankrupt, or words to that effect, and that they had better begin to make arrangements to get gasoline from the defendant company which would be able to supply their needs and not to rely upon deliveries by the plaintiff. Sauerwein was told by a certain Omholt, a salesman of the defendant, that the Lion Oil Company was on the rocks and could not pay their help for the last week. Citro was informed by the agents of the defendant that the Lion Oil Company would be out of business within the next few days and was offered $1,000 if he would sign a contract to sell Sinclair gasoline. Hartman, a customer of the plaintiff, was told that the Lion Oil Company was on its last legs and could not last much longer and that he should give the Sinclair Company a chance. Kimball was told by an agent of the defendant that the Lion Oil Company had failed and could not pay their employees their salaries. A number of other customers of the plaintiff were approached by the agents and salesmen of the defendant and were informed that the Lion Oil Company was going out of business and a number of the gasoline stations purchasing oil from the Lion Oil Company, plaintiff in this case, were offered various sums of money if they would begin accepting deliveries of gasoline from the defendant.

The record is replete with testimony showing that slanderous statements were made by numerous agents and servants, engaged at the time in the business of forwarding and promoting the sales of gasoline for the Sinclair Company. Following these statements offers of cash were made to the owners of the filling stations in question if they would handle gasoline of the defendant company for a period extending over a number of years. So far as the record in this case is concerned, it is apparent that this campaign was carried on as the result of a preconceived and concerted action on the part of the defendant inaugurated at the talk on January 29, 1926, by the sales manager of the defendant. The statements made were evidently for the purpose of promoting the business of the defendant and in the line of employment of its agents. This course of conduct appears to have continued over a period of several weeks, resulting finally in a loss to the plaintiff of all of its gasoline customers some time in April, 1926. Placing the total output of the sales of gasoline to its filling customers at approximately 150,000 gallons a month, at an approximate profit of two cents a gallon, the plaintiff would have suffered a loss of $3,000 per month and, in addition, was deprived of whatever benefit may have accrued to it by the addition of future customers in this particular field of its endeavor, if it had been permitted to continue in the selling of gasoline.

The words used were of such character that they conveyed the meaning to the hearers that the plaintiff company was on the verge of bankruptcy and was about to go out of business. It does not require expert testimony to develop this fact, as the meaning of the words was clear and unambiguous and susceptible only of their ordinary interpretation. In the connection in which these words were used, they were slanderous per se. 36 C. J. 1191. Corporations engaged in competitive business are not barred from fighting for trade and commerce in ways that are legal and justifiable, but the law does not permit them to carry false statements, harmful to competitors and unfounded in fact, for the purpose of procuring such business.

There is ample evidence in the record in support of the proposition that the slanderous statements of the agents received the full support of the defendant, and their acts, in circulating these slanderous and untrue words, were ratified by their employer. Carey Gr. Wirick, president of the Lion Oil Company, as soon as he heard of the circulation of these reports, talked with Mr. Sus, district manager for the Sinclair Defining Company, then in charge of the Sinclair business in Illinois and several adjoining States, and told him that these remarks had come to his attention. It does not appear, however, that Sus or the' Sinclair Company made any effort to put a stop to the slanderous statements, but, on the other hand, openly went on and paid certain proprietors of gasoline stations using Lion gasoline in order to prevail upon them to substitute the gasoline of the defendant for that of the plaintiff. It appears from the testimony that one Pilón was paid $2,500 to quit selling Lion gasoline and to sell the product of the defendant for a period of five years. Stier & Hoyle were also paid $1,600; Sauerwein was paid $400, and offers to pay other customers of the plaintiff were made by the defendant. These statements and offers of payment made by the defendant, following the slanderous statement of their agents and to the same customers of the plaintiff, evidenced a raitifieation of the acts of the agents in their efforts to put the Lion Oil Company out of business.

It is urged, on behalf of the defendant on this appeal, that, under the law, the defendant should not be held for the unauthorized utterances of one of its salesmen and.cites cases in support of this contention. The rule in this State appears to be that a principal is liable to third persons for a tort which he has expressly authorized or directed his agent to commit. He is also liable for a tort committed by his agent afterward ratified and affirmed by himself. It appears to be the rule also in this State that the principal is liable for the tort of an agent committed within the scope of his employment. In the case at bar.it appears from the evidence that the acts of the agents of the defendant, in uttering their slanderous statements concerning the plaintiff, originated at a meeting of salesmen at which they were ■directed to go out and procure the business of the plaintiff company. From the fact that their statements to the customers of the plaintiff were so similar in character, it would seem that they had received their information at a common source and at approximately the same time. This would lead one to believe that the statements emanated originally from the salesmen’s meeting, presided over by Baltes. Moreover, the statements were made by the agents of the defendant while in the course of their employment, as it is apparent they were all made for the purpose of procuring additional business for the defendant. As has already been stated, the fact that this course of slanderous statements was followed by the payment of money by. the defendant corporation to the customers of the plaintiff, certainly indicates a confirmation and an affirmance of the acts of its agents in attempting to procure the business of the plaintiff.

This court in the case of Rosenberg v. Underwriters Salvage Co., 190 Ill. App. 64, in its opinion says:

“ ‘Upon the principle that he who does an act by another does it himself, a principal is liable to third persons for the torts which he has expressly authorized or specially directed his agent to commit.
“ ‘The liability of the principal for torts committed by his agent is not limited to torts which he has expressly authorized or directed; he is liable for all the torts which his agent commits in the actual or apparent course of his employment; and if the agent commits a tort in the apparent course of his employment the principal is liable therefor even though he was ignorant thereof and the agent in committing it exceeded his actual authority or disobeyed the express instructions of his principal. Thus a principal is civilly liable to third persons where his agent, while acting within the scope of his real or apparent authority, is guilty of assault and battery, conversion, fraud, or trespass; and he is also liable for the negligence of his agent resulting in injury to person or property.
“ ‘A principal is not liable for the torts which his agent commits when not acting in the course of the employment, unless he subsequently ratifies them. Nor is a person liable for the torts of one who does not bear to him the relation of agent, unless he has so acted in permitting the alleged agent to represent him that he is estopped to deny the agency. . . .’ ” To the same effect see Margolis v. United Dairy Co., 214 Ill. App. 613; Wood v. Williams, 142 Ill. 269; Oxford v. Peter, 28 Ill. 434.

Ample support of this rule is also found in other jurisdictions and we believe the weight of authority supports the rule that a corporation is answerable for libel or slander published or uttered by an agent while acting within the scope of his agency. Kharas v. Collier, Inc., 171 App. Div. (N. Y.) 388; Fogg v. Boston & L. R. Corp., 148 Mass. 513; Bruce v. Reed, 104 Pa. St. 408; Grand Union Tea Co. v. Lord, 231 Fed. Rep. 390.

Upon the trial of the cause, four witnesses testifying on behalf of the plaintiff were asked the question as to whether they believed the statements that were made to them by the agents of the defendant and also whether the statements so made had anything to do with their discontinuing their sale of Lion gasoline. The statements referred to were the slanderous utterances to the effect that the Lion Oil Company was on the verge of bankruptcy and was going to discontinue its gasoline business and similar words to the same effect. It is urged that this is error on the ground that facts only are admissible in evidence and opinions forbidden. It is further urged as a ground for reversal that one of the witnesses was asked his understanding of the meaning of the words. We cannot see any valid ground for reversing this judgment for the reasons advanced.

The witnesses testifying were also the customers of the plaintiff, alleged to have been caused to discontinue the use of the plaintiff’s gasoline by reason of the slanderous statements. They did not occupy the position of disinterested witnesses whose .opinion might be sought as a matter of evidence for the purpose of show-. ing what the- world at large would believe by the uttered statements. They were asked whether or not they believed the statements and relied upon them for the purpose of sustaining the charge in the declaration that they had been caused to discontinue as customers of the plaintiff because of the alleged slanderous statements of the defendant’s agents. No better proof of this fact could be obtained than by asking the witnesses whether or not, as customers, they believed the statements and discontinued the use of plaintiff’s gasoline by reason thereof.

The Supreme Court of this State in the case of Pfiester v. Western Union Tel. Co., 282 Ill. 69, had occasion to consider a very similar question. From the facts in that case it appeared that Pfiester had sued to recover damages by reason of the failure of the West- . ern Union Telegraph Company to deliver a message to him which contained an offer of employment, and, as a result, he lost a very profitable position. During the course of the trial he was asked whether he would have accepted the terms contained in the message if he had received it. The court in its opinion says:

‘' On the trial plaintiff was permitted to testify, over objection, that he would have accepted the terms offered by the Milwaukee club had he received the message. This evidence, it is insisted, was inadmissible, being too speculative and conjectural, and was but plaintiff’s conclusion based upon a condition which did not exist at the time the message should have been delivered and was arrived at in the light of events which had subsequently transpired. Plaintiff’s offer by telegram to work for the Milwaukee club for $3000 for the 1912 season was not accepted. A counter-position or offer was made plaintiff the same day to pay him $300 per month. This offer by telegraph never reached plaintiff, hence was not accepted, to thus consummate a contract. Of course, if plaintiff would not have accepted the terms offered in this message he suffered no loss in its not having been delivered. If he would have accepted its terms then the failure to deliver the message occasioned loss to plaintiff. This court has never directly passed upon the admissibility of evidence of this character, and the decisions of courts of other States are conflicting on the question. The courts of Indiana, Kentucky, West Virginia, Georgia and some other States have ruled against the admissibility of such testimony, while a less number of courts have ruled to the contrary. Under the particular facts involved in some, at least, of the cases where the admissibility of the testimony has been ruled against we would not disagree with the decisions, but we cannot accept them as laying down a rule of evidence to be applied in this case. Plaintiff, alone, knew whether he would have accepted the offer of the Milwaukee club had he received it. Certainly his testifying he would have done so would not be conclusive if his acts and conduct contradicted Ms statement. We are unable to see why it was not competent for plaintiff to testify whether he would have accepted the offer at the time it was made. How, otherwise, under the state of facts here involved, could a plaintiff make a case for the recovery of damages ? If plaintiff would have accepted the offer made by the Milwaukee club he clearly sustained damages.”

The very gist of the action brought by the Lion Oil Company was that it had sustained damages by reason of certain slanderous statements made to its customers and which its customers believed and relied upon and which caused them to discontinue their business connections with the plaintiff. Under the circumstances no one could testify to this fact better than the customers. Certainly on cross-examination the questions would have been competent and we see no reason why they were not also competent on direct.

As to the objection that a witness had testified as to his understanding of the words uttered, we see no objection to the interpretation placed upon them by the witness, as it added nothing to the words themselves, which were clearly understandable to anyone and required no interpretation. The words uttered did not come within the rule applicable where a certain secret meaning may be gathered from the use of .certain words and which require evidence to prove the secret meaning. The witness who was asked the question as to what he understood the meaning of the words to be was a customer and, as such, stated that he understood the words to be to the effect that the plaintiff company was failing and, believing the statements to be true, discontinued his business relations with the plaintiff.

It is also urged as ground for reversal that the court erred in giving two certain instructions, numbers 6 and 7, in. behalf of the plaintiff, which contained words to the effect that the jury were not confined to awarding damages for a mere pecuniary loss, but might assess damages as a punishment in the event they found the defendant was actuated by malice in fact. The objection to these instructions is based upon the ground that there is no evidence of the financial worth of the defendant and that there is no evidence in support of the fact that the utterances were authorized by the defendant. From the record it appears that the defendant employed 25 salesmen in the Chicago territory alone; operated 10 bulk plants in Chicago; maintained offices in New York City; employed a district manager for the territory comprising Illinois, Indiana, Ohio, Michigan, Wisconsin and Kentucky, known as the Central district ; maintained two offices in Chicago and a city sales manager; was engaged in the business of refining and producing petroleum and was a nationally advertised company throughout 45 states in the Union, with its product known practically all over the world and was one of the major companies engaged in the manufacture and production of petroleum. Its payment of large sums of money to the customers of the plaintiff for the purpose of controlling them as distributors; its offer to install and furnish equipment for filling station customers, were all facts bearing on the question of the wealth of the defendant.

The words themselves were slanderous per se and, therefore, malice could be implied. There is ample' evidence in support of the proposition that the uttering of the slanderous words was encouraged and ratified by the defendant.

This court in the case of O’Malley v. Illinois Publishing & Printing Co., 194 Ill. App. 544, in its opinion says:

“As the words were libelous per se, a sufficient foundation for the recovery of punitive damages was laid. Hintz v. Graupner, 138 Ill. 158.
“While we regard the actual damage suffered by plaintiff as inconsequential, the words being actionable per se and malice being abundantly proven, it was not necessary to prove any actual damage to entitle plaintiff to recover punitive damages. We are satisfied, in view of the vindictiveness of defendant’s actions, as evidenced by its malicious repetition of the libel, that the damages assessed were quite within bounds.”

The law implies malice where the words are untrue and slanderous per se and, under such circumstances, the jury may award exemplary damages. Hintz v. Graupner, 138 Ill. 158; Cooper v. Illinois Publishing & Printing Co., 218 Ill. App. 95; Singer Mfg. Co. v. Holdfodt, 86 Ill. 455.

In view of the fact that the actual money loss, as established by the plaintiff, was approximately $30,000 a year, we cannot say that the damages were excessive, and it may well be believed that the jury awarded only actual damages as shown by the evidence. We, therefore, see no reversible error in the giving of the instructions Nos. 6 and 7 on behalf of the plaintiff. We do not regard the verdict as excessive, but we do believe that the verdict and judgment are amply supported by the evidence, not only to the effect that the servants and agents of the defendant uttered the slanderous statements charged, but that their action was indorsed and ratified by the defendant company and that its conduct was contrary to fair dealing and fair competition.

For the reasons stated in this opinion the judgment of the circuit court is affirmed.

Judgment affirmed.

Holdom, P. J., and Byneb, J., concur.


source: Caselaw Access Project

author: Mr. Justice Wilson

license: Public Domain

text:
    Joseph Kaszab, Appellee, v. Greenebaum Sons Bank & Trust Company, Appellant.
    Gen. No. 33,071.
    Opinion filed February 27, 1929.
    Rehearing denied March 19, 1929.
    Wilson, McIlvaine, Hale & Templeton, for appellant; J. F. Dammann, Jr., of counsel.
    Nelson, Wilson & McFall, for appellee.
   Mr. Justice Wilson

delivered the opinion of the court.

Joseph Kaszab, plaintiff, was a depositor in the bank of Greenebaum Sons Bank & Trust Company, a corporation, defendant. February 11, 1927, he brought this action against the defendant to recover in assumpsit on account of 468 checks, amounting to approximately $26,700, signed and issued by him during a period of approximately 19 months, which were paid in due course by the bank and charged to his account. Plaintiff’s claim is that these checks were paid out on forged indorsements of the payees named therein. It is admitted that Kaszab’s signature is genuine, but it is contended that his signatures to the checks bearing the forged indorsements were obtained by fraud perpetrated on him every week 'and extending over the 19 months’ period of time, by a man by the name of Tomasek, an employee of the plaintiff. The defendant filed its plea of the general issue and, at the'same time, filed some eight different affidavits of merits sworn to, and, among others, an affidavit to the effect: first, that the plaintiff was negligent in his method of business in allowing the checks in question to be issued; second, that the defendant returned statements semimonthly, showing the deposits made by the plaintiff, the money paid out of the plaintiff’s deposit account and charged to the plaintiff, among which were the 468 checks in question, and that these returned bimonthly statements amounted to an account stated; third, that the checks in question were returned bimonthly to the plaintiff, and that plaintiff was negligent in not discovering the forged indorsements earlier.

All of thq matters set up as a defense in the affidavit of merits filed by the defendant, including those specifically set forth hereinabove, were "stricken out upon motion of the defendant, except one which denied that the indorsements were by persons other than as named in said checks as payees.

The defendant repeatedly offered to introduce evidence for the purpose of showing that the plaintiff was negligent in failing to examine his statements in permitting the forgeries to continue for such a long period of time without discovering that fact; that the plaintiff by his negligent and careless manner of bookkeeping and a failure to maintain a proper inspection of his records was the direct cause of the loss, and other questions bearing upon the negligence of the plaintiff in permitting the loss to occur. In a discussion arising between court and counsel for the defendant, brought about by an offer of counsel to introduce testimony bearing on the question of negligence, the court said: “But the evidence, the great import of which was negligence on the part of the plaintiff in not finding out that he was being defrauded, I have tried consistently to keep out upon the theory of the plaintiff that that is no defense.” At the conclusion of the evidence, the court directed the jury to bring in a verdict in favor of the plaintiff for the amount of the judgment which appears to have been approximately the total amount of the checks bearing the forged indorsements.

It appears from the testimony that the plaintiff was engaged in business in the City of Chicago and employed between 70 and 100 workmen. He had in his employ a bookkeeper by the name of Gertz, who made up the payroll checks from time cards. These time cards were kept by Tomasek, who, apparently, had sole charge of them. They showed the number of hours’ work done by each workingman and the amount each was to receive. After these checks were prepared, they were signed by the plaintiff and. the time cards were returned to Tomasek. After they were signed they were put through a stamping machine which registered the amount in dollars and cents on the check corresponding to the pen and ink figures made by Gertz. After the checks were made out they would be entered upon a check register and after they were returned by the bank they were compared with the bank’s statement.

It appears that at first only one or two of the checks bearing the alleged forged signatures of the payees named therein were issued weekly, but the number increased as time went on. The first of these checks appears to have been issued some time in March, 1925, and the last check appears to have been issued some time in October, 1926. These checks appear to have been kept by the plaintiff in a drawer in his desk until they were distributed. All of the checks appear to have been cashed at but two banks, namely, the Kaspar-American State Bank and the Metropolitan State Bank, and all were paid by the defendant on clearing house indorsements. None of these checks was presented directly to the defendant by the payees named therein.

Such evidence as there is in the record would seem to indicate that the employees were hired by the plaintiff and a number of them appear to have been known to him personally.

Each month the defendant bank returned all canceled checks, including the ones in question upon which it had made payment, together with a monthly statement, upon which appeared the following:

“Please examine this statement upon receipt and report any differences at once. It is understood that the depositor must notify this Bank of any errors, discrepancies, irregularities, etc., covering the transaction of any month, before the 15th day of the following month, otherwise no claim against this Bank can be made therefor.’-’

It is insisted on behalf of the plaintiff that a depositor’s check, directing to whom it is payable, is the instruction for the bank to follow and that, in the event it does not, it is strictly held accountable to the depositor. It is also urged by the plaintiff that the affidavit filed in support of the plea did not set up sufficient facts and, therefore, the court properly struck these affidavits from the record.

We are of the opinion that the affidavit was sufficient. Moreover, the attitude of the trial court throughout, upon the insistence of counsel for the plaintiff, was that negligence was not admissible for the purpose of relieving the defendant of liability. Such being the state of the record, it is "apparent that the inclusion of additional facts in the affidavit of defense would have been unavailing. Counsel on both sides have gone to great length in citing authorities in relation to the law governing the relationship between bank and depositor, particularly with reference to the cashing of checks by the bank on forged indorsements. We are of the opinion from an examination of the record that there is evidence upon which the question of negligence should have been submitted to the jury. The fact that the bank furnished monthly statements to the plaintiff; that the employee Tomasek was able to continue the forging of indorsements for a period of 19 months; that the checks were signed by the plaintiff with the name of the payee thereon, during that period of time, is evidence sufficient to take the case to the jury. Any check-up of overhead expense would have shown the unusual cost. Moreover, defendant was precluded from presenting this issue to the jury and, as a result, may have been unable to present other facts bearing on the question of the plaintiff’s exercise of due care. A review of the authorities cited by plaintiff discloses that many of the cases cited are of and concerning isolated transactions and,, in some cases, involving a relationship other than that of bank and depositor. The rule is too well settled in this State, and we believe generally, to require the citation of numerous authorities.

The Supreme Court of this State in the case of Bartlett v. First Nat. Bank of Chicago, 247 Ill. 490, in its opinion says:

“When one of two innocent parties must suffer loss by reason of the wrongful acts of a third party, the rule is almost universal that the party who has made it possible, by reason of his negligence, for the third party to commit the wrong must stand the loss. In this case, if the appellants had notified the banks who were handling said drafts that R. L. Walsh was forging the names of the farmer payees in order to get the money on the said drafts from the banks, the loss which was sustained by the passing of said drafts would never have occurred. This they did not do, but remained quiet so long as they thought they were getting the benefit of the money that was paid on said drafts, and only complained when they learned that their agent, Walsh, was talcing advantage of the position in which they had placed him by his appointment as their agent, with authority to draw drafts, by drawing drafts to farmers who had not delivered grain, and endorsing the names of such farmer payees upon the drafts and drawing the money from the banks thereon and appropriating the same to his own use. We think it clear if the appellants enjoyed the benefits which accrued to them from the business done by Walsh so long as it was done honestly, that when Walsh became dishonest and appropriated the money which he drew by reason of forged endorsements they should suffer the loss which followed his rascality, and not be permitted to unload such loss upon the "banks that innocently handled said drafts.”

This court in its opinion in the case of Osborn v. Corn Exchange Nat. Bank of Chicago, 218 Ill. App. 28, in its opinion says:

“The question for our solution is: Will the law saddle the loss in this case upon defendant, who was guileless of negligence in the challenged transactions, or compel the plaintiffs, whose negligent conduct gave their bookkeeper, DeLisle, unrestrained opportunity to commit the forgeries complained of ? It cannot be gainsaid that defendant furnished plaintiffs every opportunity during all the time covered by the forgeries to discover and arrest them, by rendering to plaintiffs monthly statements of the condition of their bank account, returning each time all vouchers, including the checks which bore the forged indorsement.
“We are of the opinion that the negligence of the plaintiffs attributable to their conduct as above recited is an effectual barrier to recovery in this action. Merchants’ Nat. Bank of Peoria v. Nichols & Shepard Co., 223 Ill. 41; Morgan v. U. S. Mortgage & Trust Co., 208 N. Y. 218; Leather Manufacturers’ Nat. Bank v. Morgan, 117 U. S. 96; California Vegetable Union v. Crocker Nat. Bank, 37 Cal. App. 743, 174 Pac. 920.
“It clearly appears from the proofs that had either of the plaintiffs given any attention whatever to the returned checks or to the state of their balances with the defendant bank, they would have known that DeLisle was forging the name of the Federal Union Insurance Company to checks, cashing them and converting the money thus received to his own use. Nor can it be denied that defendant in rendering monthly statements with vouchers, checks, etc., to plaintiffs, showing the state of their accounts and all the transactions of the preceding month, acted according to the usual custom of bankers in Chicago.”

The United States Supreme Court in the case of Empire Trust Co. v. Cahan, 274 U. S. 473 (47 Sup. Ct. 661), in its opinion, says:

“The form in which the withdrawals took place does not appear. They might have been, like the deposits, in checks to the son’s own order. All that is known is that the respondent did not get the benefit of them. But we do not place our decision upon that narrow ground. For in addition to what we have said, the transactions went on for over two years and the petitioner fairly might expect the respondent to find it out in a month or two if anything was wrong. Careful people generally look over their bank accounts rather frequently.”

Banks deal with a great number of depositors and, while they owe an obligation to their customers, nevertheless, in view of the great number of transactions carried on iñ the course of a banking day, it becomes incumbent upon the depositor to assist by exercising some sort of supervision over his own individual account. It is not fair to the bank for such a depositor to ignore his own responsibility and rely solely upon the diligence of the institution with which he is doing business. This would appear to be particularly true where the depositor is in a better position to discover the fraud practiced upon him through the agency of an employee closely associated with and under his direct supervision and control.

For the reasons stated in this opinion the judgment of the circuit court is reversed and the cause remanded for a new trial.

Judgment reversed and cause remanded.

Holdom, P. J., and Byner, J., concur.


author: Mr. Presiding Justice O’Connor

text:
    State Bank of Palatine et al., Appellees, v. Carrie Barbaras, Appellant.
    Gen. No. 33,069.
    Opinion filed March 11, 1929.
    Rehearing denied March 25, 1929.
    Ralph L. Peck and Henry J. Harz, for appellant.
    McGilvray, Eames, Vaughan & Tilley, for appellees; A. G. Humphrey, of counsel.
   Mr. Presiding Justice O’Connor

delivered the opinion of 'the court.

The State Bank of Palatine and the trustee named in the trust deed filed their bill to foreclose the trust deed on certain real estate in Cook county given tó secure an indebtedness of $2,500. A decree of foreclosure was entered as prayed for. Carrie Barbaras, one of the defendants, prosecutes this appeal.

The record discloses that on March 17,1924, Edward W. Hutchison, a widower, borrowed $2,500 from the complainant bank and delivered to it his note for that amount due three years after date and to secure the payment executed the trust deed in question. After-wards, on October 9, 1924, Hutchinson conveyed the premises by warranty deed to Charles Barbaras and Carrie Barbaras, the defendant, the parties being husband and wife, the conveyance to them being in joint tenancy. The deed stated that the conveyance was made “subject, however, to a trust deed in the amount of $2,500, being recorded in the recorder’s office of Cook County . . . hereby releasing and waiving all rights under and by virtue of the Homestead Exemption Laws of the State of Illinois.” There being a default in the payment of principal, interest and taxes, the complainant on October 27,1927, filed its bill of foreclosure. Carrie Barbaras, the defendant, filed her answer admitting the default in payment of the principal, interest and taxes, and that the State Bank of Palatine, the complainant, was the owner of the note and trust deed. After the issues were made up the cause was referred to a master, and while there pending the defendant, Mrs. Barbaras, filed her petition praying that the reference to the master be set aside and vacated and the cause placed upon the trial calendar, stating as reason therefor that the issues were simple and that the proof could be made before the chancellor in half an hour’s time and the expense of reference to the master saved. In the petition she admitted that she did not contest the indebtedness or the amount due and stated that the only proof required on the hearing of the cause was the mere formal proof which would be made by the introduction of the trust deed and notes, all of which could be done in a half hour’s time because there was no contest of any kind and reference to the master was unnecessary and burdensome. She further set up that the property on which the trust deed was being foreclosed was the home of herself and her daughter and was worth $7,000. Other matters were alleged in the petition and she requested that the case be postponed a few months to enable her to pay off the indebtedness. The prayer of the petition was denied.

Counsel for the defendant in their brief make two points: (1) that the trust deed in question was acknowledged before a notary public who was a stockholder and director of the complainant bank and therefore the estate of homestead was not conveyed by the trust deed; and (2) that the Act of May 15, 1903, 45, eh. 30, Cahill’s St. 1927, did not cure the defect in the acknowledgment of the trust deed.

In Ogden Building & Loan Ass’n v. Mensch, 196 Ill. 554, it was held that where the owner of premises executed a mortgage to secure a loan made by the building association and the acknowledgment of the mortgage was taken by a notary public who was a stockholder of the association, the acknowledgment was void and the mortgage inoperative as to the homestead estate of the mortgagors. So in the instant case, if there was an estate of homestead in the premises at the time of the execution of the trust deed, the acknowledgment of the trust deed having been taken by a notary public who was a stockholder and director of the complainant bank that loaned the money, the trust deed would be inoperative so far as the estate of homestead was concerned. In the Mensch case, supra, the premises there mortgaged were occupied by the mortgagors as their homestead, while in the instant case there is no proof that Hutchinson, who borrowed the money from complainant and executed the trust deed in question, was at that time occupying the premises as his homestead. But in any event, the defendant could not acquire an estate of homestead in the premises as against the trust deed because it was a lien on the premises when she and her husband bought the property. Moreover, the deed conveying the premises to them expressly stated that the conveyance was made subject to the trust deed securing the $2,500.

In Symonds v. Lappin, 82 Ill. 213, it was held that unless the right of homestead exists at the time the mortgage is given, there is ho necessity for its relinquishment. And in McCormick v. Wilcox, 25 Ill. 274, the court said (p. 275): “The bill, which was taken for confessed, shows that the mortgagors resided upon and occupied the mortgaged premises at the time the bill was filed, but there is no intimation that it was their homestead at the time the mortgage was executed. No homestead rights could attach to the premises by their making it a homestead after the mortgage was executed. ’ ’ Defendant and her husband having purchased the property subject to the incumbrance, which was expressly referred to in the deed conveying the premises to them, cannot now be heard to say that there was no lien on the premises or the estate of homestead. Henderson v. Bellew, 45 Ill. 322.

We think the contention of the defendant that the Act of May 15, 1903, Cahill’s St. ch. 30, if 45, did not validate the acknowledgment of the trust deed in question must be sustained. We are also of opinion that that act did not authorize the acknowledgment of trust deeds and mortgages before a notary public who was a stockholder and director of a corporation interested in the matter. That act merely validates acknowledgments that had been taken prior to the enactment of the law and it in no way affects acknowledgments made after the passage of the act. This is the obvious meaning of the act. It is entitled, “An Act to legalize acknowledgments of deeds, mortgages and other instruments in writing, heretofore taken by any notary public, justice of. the peace or other officer, who may have been a stockholder in any such corporation at the time of taking such acknowledgment.” The title is unambiguous. The purpose of the bill is there plainly stated to be to legalize acknowledgments “heretofore taken” and the body of the act conforms to the title. It refers to mortgages, etc., “which have been acknowledged” by a notary public “who was, or may have been at the time of such acknowledgment, a stockholder or officer of such corporation; and all such acknowledgments or proof of such deeds . . . heretofore taken, before any such notaries public . . . are hereby legalized.”

This act, Cahill’s St. ch. 30, H 45, clearly and unmistakably refers to defective acknowledgments taken prior to its enactment. But counsel for complainant cites the case of Illinois Tractor Co. v. English, 235 Ill. App. 462. It was there contended that the trust deed there involved was invalid because the acknowledgment was by a notary public at a time when he was a stockholder and director of the company. The court said (pp. 468-469): “It is sufficient answer to this contention that since the act of May 15, 1903, concerning acknowledgments of instruments to which corporations are parties, before officials and stockholders, such acknowledgments became legalized and were thereafter valid.” The court there refers to Maxwell v. Lincoln & Fifth Ward Building & Loan Ass’n, 216 Ill. 85, as authority for its holding. In the latter case the mortgage involved was dated December 2, 1895, which was many years before the passage of the act in question, and we think the Appellate Court in the English case did not mean to hold that after the passage of the Act of 1903 mortgages thereafter made might be acknowledged before a stockholder and director of an interested corporation.

The decree of the superior court awarding a foreclosure of the trust deed is affirmed.

Affirmed.

McSurbly and Matchett, JJ., concur.


text:
    Philip Papas, Appellee, v. Bernard W. Snow, Bailiff of the Municipal Court of Chicago, Appellant.
    Gen. No, 33,078.
    Opinion filed March 11, 1929.
    Edward I. Rothbart and Seymour M. Lewis, for appellant; Wharton Plummer, of counsel.
    Frank L. Childs, for appellee.
   Mr. Presiding Justice O’Connor

delivered the opinion of the court.

Plaintiff brought an action of replevin against the bailiff of the municipal court to recover possession of a motor truck. The truck was taken on the writ, delivered to the plaintiff and on a trial before the court without a jury the court found the right to the possession of the property was in the plaintiff and assessed his damages in the sum of one cent.

The record discloses that plaintiff, Papas, sold the motor truck in question to Thomas Marcos for $1,300; $450 was to be paid in cash and the balance secured by chattel mortgage on the truck. The truck was sold January 15,1924, but Marcos being unable to make the cash payment of $450, Papas retained possession of the truck. Afterwards on January 24 Marcos came in and paid the $450 and executed a chattel mortgage on the truck to secure payment of the balance. The mortgage was recorded January 24 and the next day the truck was delivered to Marcos. The evidence further shows that on December 18, 1923, the American Acceptance Corporation obtained a judgment, in the municipal court of Chicago, against Marcos for $743.52. An execution was issued on the judgment on December 18 and delivered to the bailiff of the municipal court. The bailiff made a demand on Marcos, but no payment being made the execution was returned January 28, 1924, no part satisfied. On January 15, 1924, an alias- execution was issued and a levy on the truck was made February 21, 1924. Shortly thereafter the instant replevin suit was brought and the truck taken from the bailiff as stated. The foregoing facts were undisputed.

The sole question therefore for decision is: Was the lien of the chattel mortgage superior to that of the judgment rendered against Marcos in the municipal court? In Brewster v. Peter Schoenhofen Brewing Co., 66 Ill. App. 276, it was held that where a vendor of personal property before its delivery took from the vendee a mortgage to secure the payment of the purchase money, he might maintain an action of replevin against the constable who levied on the personal property under an execution against the vendee which the constable had received prior to the sale of the property. The facts in that case are similar to the facts in the instant case and substantially the same contentions were there made as are made here by defendant. The court there held that the plaintiff was not estopped from offering evidence tending to contradict the recital of the mortgage to the effect that at the time of its execution the property was in the possession of the vendee.

We are entirely satisfied with the holding and reasoning of the Brewster case. As stated in that case, the only reason the execution became a lien upon the truck at all was by reason of its sale to the vendee. We think a person engaged in the sale of personal property ought to be able to sell it to one who has a judgment against him and yet be able to protect his lien for a part of the purchase money by way of a chattel mortgage.

Defendant has cited the case of Clark v. Woodruff, 100 Ill. App. 18, as laying down a rule contrary to that announced in the Brewster case, but we think the facts in the Clark case are entirely different. It does not appear that in the Clark case the sale or mortgage was bona fide.

The judgment of the circuit court of Cook county is affirmed.

Affirmed.

McSurely and Hatchett, JJ., concur.


text:
    American Cleaners and Dyers, Appellee, v. Charley Foreman et al., Appellants.
    Gen. No. 33,087.
    Opinion filed March 11, 1929.
    Austin L. Wyman, for appellants.

      Albert Fink, Charles J. Sopkin and Edward S. Schneider, for appellee.
   Mr. Presiding Justice O’Connor

delivered the opinion of the court.

By this appeal defendants seek to reverse a decree of the circuit court of Cook county which enjoined them “from directly or indirectly, for themselves or any other firm or corporation, call on, solicit, canvass, serve, divert, take away or from attempting to call on, solicit, canvass, divert, serve or take orders for cleaning and dyeing or either cleaning or dyeing of and from the following customers of the complainant, American Cleaners and Dyers, a corporation.” Then follows a list of names and addresses.

The record discloses that complainant is a corporation engaged in the cleaning and dyeing business and that defendants Charley Foreman and Joe Switkin had been in its employ for a number of years. Each had a route and their business was to call on each of complainant’s customers, collect garments that were to be cleaned and dyed and after complainant had cleaned or dyed the garments the drivers would return them to their customers. The customers are designated in the record as retail dealers or small shopkeepers who receive the garments that are to be cleaned and dyed from the owners and send them to the complainant to have the work done. Each of the two drivers had from 40 to 50 customers.

The evidence further shows that when Foreman and Switkin were employed by complainant, complainant assigned to each a route and gave to each of them the names of some customers and furnished each of them with an automobile to go out and bring garments from customers and to return them after they were cleaned. It further appears that a part of their duties was to solicit new- customers, and the evidence shows that from time to time new customers were obtained; that at the time they were employed by complainant they were paid a salary of $40 a week. It was afterwards raised to $75 and the greater part of the time they were employed they received $85 a week. On Saturday, January 21, 1928, Foreman and Switkin left complainant’s employ and the following Monday began to work for the defendant, Central Cleaners and Dyers, a corporation. At that time each of them had been bringing in business to complainant which amounted to approximately $50,000 a year.

The evidence further shows that complainant and others engaged in like business in Chicago belonged to an organization known as the Chicago Master Cleaners and Dyers Association and had entered into a written agreement with the Laundry and Dye House Drivers and Chauffeurs Union, Local 721, of which union Foreman and Switkin were members. The contract contained the provisions usually found in agreements entered into between employers and unions. Among other things it was provided that an employer would enter into no agreement with its employees that would in any way conflict with the agreement made between the union and the Master Cleaners except that the employer might enter into an agreement with its employee that the latter should refrain from soliciting any of the patrons or customers of the employer from whom the employee received goods for cleaning or dyeing for a period of not more than one year after the employment ceased. Another provision of the agreement fixed the salary to be paid.drivers at $35 a week plus certain commissions.

Shortly before Foreman and Switkin left complainant’s employ, there is some evidence tending to show that complainant told them he would pay them only the union scale of wages, which was considerably less than the $85 a week which each had been receiving, and that they objected to this reduction.

The evidence also shows that about this time Ben H. Kornick got in touch with Foreman and Switkin and arranged for the incorporation of defendant, Central Cleaners and Dyers, and each of them subscribed for one share of stock. The capital stock was $60,000 divided into 600 shares. Kornick subscribed for 596 shares and was elected president, Switkin vice-president and treasurer, and Foreman secretary. They were also directors of the company. As stated, Foreman and Switkin, on the Monday following the time they left complainant’s employ, went out on their respective routes soliciting their old customers on behalf of the defendant, Central Cleaners and Dyers, and about a month thereafter Switkin had induced 39 of his 43 old customers to give their work to the new company and Foreman had secured at least 10 of his old customers to do likewise.

There is substantially no dispute as to the facts above stated. The master, to whom the case was referred, after taking the evidence made up his report and found that the names and addresses of complainant’s customers who had been served "by Switkin and Foreman “were trade secrets of the complainant,” having been obtained by them while they were in the employ of complainant at a very large expense to complainant.

The master further found that the written contract entered into between the union and the Master Cleaners and Dyers above mentioned was of no effect in the instant case because complainant and Foreman and Switkin never worked under it; that neither of them made any agreement with complainant that they would not solicit complainant’s customers after they left its employ and that the solicitation by Switkin and Foreman of their old customers “was and is unequitable and unjust and is unfair trade and dealings,” and that they.should be enjoined for one year. The report was approved and a decree entered in accordance with the master’s findings and recommendations.

An examination of the authorities discloses that there is great conflict of opinion and decision as to whether an employee, in the absence of an express agreement not to do so for a reasonable period of time after he ceases his employment, may solicit for his new employer his old customers obtained by him while engaged in his former employment.

All of the authorities seem to agree that if the employee under such circumstances surreptitiously copies the names and addresses of his employer’s customers while he is employed, and takes such lists with him, he will be enjoined from soliciting the customers for his new employer. The decisions also hold that an employee will be enjoined where, in his new employment, he solicits his old customers, leading them to believe that he is still working for his former employer. So also all agree that the employee in his new position must act in good faith when he solicits his old customers. But there is great disagreement as to whether he may solicit them at all.

Upon careful consideration we are of the opinion that the great weight of authority and the better reason is that in the absence of an express contract, equity will not enjoin an employee after the termination of his employment from soliciting business from the customers of his former employer.

In 32 Corpus Juris, pp. 160-161, it is stated that the names of customers of a business concern whose patronage has been secured by business effort and the expenditure of time and money, should be deemed sacred and entitled to protection, although there are authorities directly to the contrary. Continuing, it is said:

“It has been held that an employee who, without the employer’s knowledge or consent, copies a list of the employer’s customers or patrons, or who, on the termination of his employment, carries away records or documents containing trade secrets or other confidential matters relating to the employer’s business, will be enjoined from using such lists in a similar business for the purpose of taking away business from his former employer for himself or others. It has also been held that an employee who has been furnished a list of customers by the employer for the purpose of soliciting trade will be enjoined, irrespective of contract not to use confidential knowledge gained in the course of his employment except in the furtherance of the employer’s interests, from using such list in securing the patronage of such customers for another employer. . . . On the other hand, in the absence of express contract, equity will not enjoin an agent or servant, after termination of his employment, from soliciting business from the customers or patrons of his former principal or employer, where by so doing no business secret or trust which has been reposed in him because of his relation as agent or servant is violated: . . . that one who has employed him is likewise not liable to be enjoined from using his knowledge of the former employer’s customers acquired by the employee while in the former employment where no breach of confidence is involved. ’ ’

In Peerless Pattern Co. v. Pictorial Review Co., 132 N. Y. Supp. 37, in discussing the question now under consideration it was said (p. 39):

“All that clearly appears is that he undertook to use in his new employment the knowledge he had acquired in the old. This, if it involves no breach of confidence, is not unlawful; for equity has no power to compel a man who changes employers to wipe clean the slate of his memory.”

And in Boosing v. Dorman, 133 N. Y. Supp. 910, the court said (p. 911):

“Secret processes of manufacture confided to an employe in the course of his employment have been protected from disclosure or use by the employe, either for the benefit of himself or another after his employment had terminated. Even in the absence of an express contract, this is a property right for which the master is entitled to protection. ... I cannot see, however, that the information acquired by the defendant Dorman in serving the plaintiff’s customers can be properly classified as a trade secret.”

In New York Towel Supply Co., Inc. v. Lally, 162 N. Y. Supp. 247, it was held that the towel company was not entitled to an injunction enjoining its former employee from soliciting its customers whom the employee had served while he was working for the towel company.. It is there said (p. 248):

“The plaintiff is engaged in the business of supplying towels, aprons, and soap to offices, ... It seeks to enjoin two former employes from soliciting' for themselves the custom of those whom they served while employed by the plaintiff.
“The business is, and was before plaintiff engaged in it, open, common, and essentially simple. . . . The logic of the right of action which plaintiff asserts, when carried out, is rather startling. If sustained, its extension is warranted to every sort and variety of trade, profession or employment. It will end forever, for youth, the ambition of competing with the employer for the old trade by fair means and hopeful energy. If the principle contended for be rigidly and uniformly applied, the preposterous legal result would follow that a ‘prentice hand’ having mastered his business or profession, may only use his energies to the full in some other occupation or in some other place.
“The plaintiff does not rest its claim upon any merit of invention or secret process brought into the business. Its old trade is entirely the result of personal solicitation, as defendants’ trade must necessarily be. The plaintiff did not in advance require its employes to covenant not to enter into competition on leaving the employ; this could have been done, and probably would be enforceable. . . . Instead, it is asserted that the competition of the former employes is an unfair competition, because it involves the use of knowledge of plaintiff’s customers acquired while the employment lasted.”

To the same effect is Sachter’s Ice Cream Co. v. Sunshine Ice Cream Co., Inc., 190 N. Y. Supp. 391, where it was held that a dealer may not enjoin its former employee, and rival dealer from soliciting its customers. There, one who was employed as a driver, salesman and solicitor of an ice cream wagon, was discharged and was employed by defendant, a business rival. He solicited his former employer’s customers, and it was held that equity would not enjoin him from continuing to do so. The court there said (p. 392): “Plaintiff asks in effect that the defendant, an ordinary solicitor in an ordinary business, may work up a list of customers, and then, having been discharged, with or without cause, may never again approach such customers in the interest of himself or of any other employer.” The injunction was refused.

The case of Goldberg v. Goldberg, 200 N. Y. Supp. 3, is almost in point on the facts. The court there held that, in the absence of fraud or an express agreement not to go into business or to solicit the employer’s customers, a tailor and cleaner, whose business it was to deliver and solicit trade, has a right on leaving his employment to try to build up his own business by direct solicitation of the former employer’s customers, there being nothing secret in getting up a list of tailors. That case was heard by five judges of the Appellate Division of the Supreme Court of New York and the opinion and the decision were unanimous. The court there, after distinguishing some authorities, said (p. 6): “There is nothing secret about getting up a list of men and women who are in the tailoring business in Brooklyn. A casual reference to a business directory will give the whole list. Undoubtedly the plaintiff, through her drivers, solicited trade from a list of tailors, and undoubtedly the solicitation was the means of procuring the business.” The court then distinguishes cases where an injunction was warranted where the former employee was soliciting the former employer’s customer’s by fraudulent and unfair means; and continuing the court said: “In the absence of fraud, or in the absence of an express provision in the contract of employment not to go into business or to solicit the former customers of the employer, the employee has a right to embark on his own enterprise and to try to build up his own business by direct solicitation of his former master’s customers and others,” and further, that the Court of Appeals of that State, in 210 N. Y. 529, had affirmed the doctrine just stated.

In the case of Newark Cleaning & Dye Works v. Gross, 97 N. J. Eq. 406 (128 Atl. 789), it was held that the solicitor for a dyer and cleaner, upon leaving his employment, had the right to build up a competing business by soliciting his former employer’s customers. The court said (pp. 406, 407):

“The complainant’s customers are all well known in the trade; they are classified and listed in the telephone and city directories, and while it may not be known generally who does their work, it is easily ascertainable. They,are an open market and fair field for all in the complainant’s line who seek them. The defendant left his list behind when he quit. He has no need for it for he knows the customers by heart — any other solicitor would know them by the display signs of their business. The fact that he knows they deal with the complainant, while others know only that some one does their work, is not a trade secret, sacred to his former employer, not to be invaded now that he has launched'in business for himself. If it were, there would be fewer merchants.”

In Progress Laundry Co. v. Hamilton, 208 Ky. 348 (270 S. W. 834), it was held that a strictly “trade secret” would be protected in the hands of the owner by injunction, that this is the universally accepted rule, and that there are no authorities to the contrary. In that case a former employee of a laundry, who solicited its customers, was soliciting them for a rival laundry company, and it was held that he had a right to do s©. In passing on the question whether the information the employee had received while working for his former employer was a “trade secret,” the court said (p. 349):

“Strangely enough, as it appears to us, some of the American courts have so adjudged, while a larger number, according to our opinion, correctly hold to the contrary. The text in 22 Cyc. 842, in an effort to concretely define the term ‘trade secret,’ says: ‘A trade secret is a plan or process, tool, mechanism or compound, known only to its owner and those of his employees to whom it is necessary to confide it. ... A process commonly known to the trade is not a trade secret and will not be protected by injunction. ’ That definition meets with our approval ... to hold that a list of customers, obtained in the manner as did defendant in this case, could not be solicited by bim . . . when subsequently engaged in a rival competing business is, according to our opinion, directly antagonistic to another cherished principle of law, i. e., that competition should not be stifled, but be free and untrammeled. If defendant . . . could be enjoined from soliciting his former customers ... in the prosecution of the same business for his new employer, then a traveling salesman, who is ordinarily called a ‘drummer,’ for a particular business . . . could not engage in business thereafter for another . . . conducting a like business ... by selling to his former customers. The inevitable result of which would be that a salesman would be forever barred from selling to a customer whose acquaintance he formed during his first employment.”

And the Supreme Court of Arkansas in El Dorado Laundry Co. v. Ford, 174 Ark. 104 (294 S. W. 393), rendered an opinion to the same effect. It was there held the names of customers of a laundry learned by a former employee did not constitute a trade secret, and that the former employee would not be enjoined from soliciting the patronage of the former customers for a rival laundry.

So also was the holding of the Supreme Court of Washington in City Ice & Cold Storage Co. v. Kinnee, 140 Wash. 381 (249 Pac. 782). The court there said that an ice company was not entitled to an injunction to prevent its former employee from soliciting its customers on their old routes to buy ice from them on the theory that the knowledge they had gained from the company’s customers was confidential or a trade secret. This same rule was announced in Kansas City Laundry Service Co. v. Jeserich, 213 Mo. App. 71 (247 S. W. 447). In Lewitter v. Adler (N. J. Eq.), 137 Atl. 541, it was held that a former employee, a window washer, who engages in business for himself would not be restrained from soliciting his former employer’s customers in the absence of a covenant to refrain from doing so, where he was guilty of no imposition or fraud. The same rule was announced by the Supreme Court of New Mexico in Excelsior Laundry Co. v. Diehl, 252 Pac. 991, where a great many authorities on this question are discussed. And in Federal Laundry Co. v. Zimmerman, 218 Mich. 211, it was held that equity would not restrain the driver of a laundry wagon, who had been working on a certain route and who had severed his relations with his former employer, from soliciting the former employer’s customers for a competitor by - whom he was then employed. And the Supreme Court of Maryland in Fulton Grand Laundry Co. v. Johnson, 140 Md. 359, a case often cited with approval, held that a list of customers of a laundry was not a trade secret to be protected by a court of equity. The court there said (p. 361): “The decisions in this country and in England seem to be fairly harmonious in principle as to the duty of courts to protect owners of trade secrets from disclosure by employees, but the divergences begin when the question to be determined in particular cases is whether the thing sought to be protected should be classed as a trade secret. ... A thing can hardly be said to be a secret, in the sense that it should be guarded by a court of equity, which is susceptible of discovery by observation, and which is open to the observation of any one who thinks it worth while to observe.” The court then refers to Empire Steam Laundry Co. v. Lozier, 165 Cal. 95, and to an English case and two reported in the N. Y. Supp., which hold to the contrary, and continuing said (p. 362):

“But, while we do not decide that there might not be cases in which an employer should be protected from the use by an employee of a list of customers, fraudulently and surreptitiously obtained, or where, in the nature of the particular case, or by reason of the care used in concealing them, the names of customers are so guarded as not to be easily obtainable by others than confidential employees, we are not willing to hold that in any ordinary business an employee, on going into business for himself or into the employ of another, should be enjoined from seeking to do business with friends he has made in the course of a previous employment, merely because he became acquainted with them while so engaged. . . . Under such a rule, a traveling salesman, every time he changed employers, if in a like business, would be compelled to give up all the friends and business acquaintances made during the previous employment. Such a rule would tend to destroy the freedom of employees and to reduoe them to a condition of industrial servitude,”

The Supreme Court of Kansas, in the case of Garst v. Scott, 114 Kan. 676, held that an injunction would not lie to restrain a former employee from soliciting business for himself from customers of his former employer.

A contrary rule has been announced in Empire Steam Laundry Co. v. Losier, supra, where.it was held that former drivers of a laundry will be perpetually enjoined from soliciting its customers for a rival concern. The question, so far as we are advised, has not been decided by the courts of review of this State. Counsel for complainant, however, cited the cases of Loven v. People, 158 Ill. 159, and Boylston Coal Co. v. Rautenbush, 237 Ill. App. 550; but we think neither of them is in point. The Loven case was a proceeding whereby it was sought to have Loven adjudged in contempt of court for violating an injunction whereby Loven, a former employee of a medicine company, was enjoined from continuing to correspond with and solicit the medicine company’s former customers. He apparently did not seek to have the injunction set aside but when he was brought up for contempt for violating the injunction, sought to show that the writ in its terms was too broad and unwarranted, but the court held that the injunction must be obeyed until it was set aside; so the question now before us was not presented in that case.

The Boylston Coal Company case involved the use of a large mail order list of customers of the complainant, who was engaged in the sale of coal by means of the mail. When one of its employees left he surreptitiously took with him a long printed list of the customers; it was held that he had no right to do so and he was enjoined. No brief on behalf of the defendant was filed in that case. Obviously the case is not in point.

Upon a consideration of the authorities we are of the opinion that the great weight of authority and the better reason supports the view that, in the absence of an express contract, equity will not enjoin a former employee from soliciting the employer’s customers whom he served during his employment where, as here, no list of names was taken by Foreman and Switkin when they left complainant’s employ and no fraud was committed by them. Under the circumstances disclosed by the evidence in the instant case, the names and addresses of complainant’s customers were not trade secrets within the meaning of the law. And as stated by the Supreme Court of Maryland, to enjoin them under the facts disclosed would tend to destroy their freedom “and to reduce them to a condition of industrial servitude. ’ ’

For the reasons stated the decree of the circuit court of Cook county, being contrary to law, is reversed and the cause is remanded with directions to dismiss the bill for want of equity.

Reversed and remanded with directions.

McSurely and Matchett, JJ., concur.


text:
    Parker-Holladay Company, Appellant, v. Norris H. Bokum and John H. Dingle, trading as Bokum & Dingle, Appellees.
    Gen. No. 33,096.

      Opinion filed March 11, 1929.
    Austin E. Torney, for appellant; Harry F. Brewer, of counsel.
    Defrees, Buckingham & Eaton, for appellees; Robert E. Wright, of counsel.
   Mr. Presiding Justice O’Connor

delivered the opinion of the court.

Plaintiff brought an action against defendants to recover $422.53 claimed to be a balance due for goods sold and delivered. The case was heard without a jury, there was a finding and judgment in defendants ’ favor and plaintiff appeals.

The record discloses that on July 8, 1927, plaintiff sold and delivered to defendants certain goods. On September 6, 1927, defendants paid plaintiff $44.95 but whether this item was paid on account of the indebtedness is not clear. The defense interposed was that plaintiff corporation had not paid its franchise tax as required by the laws of this State; that plaintiff was in default in such payment on July 8, 1927, when the goods in question were sold and therefore the contract of sale was void and that no suit could be maintained because prohibited by statute. The court held this defense good and entered a finding and judgment for defendants.

The record further shows that plaintiff corporation paid its franchise tax July 14, 1927, and it is conceded that if the legal defense stated is untenable then plaintiff is entitled to recover $422.53.

To determine the question involved it is necessary to consider sections 105, 108, 112, 114, 115, 116, 117, 118, 125 and 128 of chapter 32, Cahill’s 1927 Statutes, These sections are a part of the General Corporation Act passed by the Legislature in 1919.

Section 105 provides that all corporations organized for profit (except insurance companies) under the laws of this State, or doing business in this State or admitted to do business in this State, shall pay an annual license fee or franchise tax.

Section 108 provides that the franchise tax “shall be due and payable on the first day of July of each year and shall be the franchise tax for the year commencing on the first day of July in which it is due and ending on the thirtieth day of June next thereafter.” By section 112 it is provided that the Secretary of State between the first day of February and the fifteenth day of June of each year shall mail a notice in writing to each corporation against which a tax is assessed, notifying the corporation of the amount of the franchise tax.

Section 114 is as follows: “If the franchise tax assessed in accordance with the provisions of this Act shall not be paid on or before the thirty-first day of July, it shall be deemed to be delinquent, and there shall be added a penalty of five per cent for each month or part of month that the same is delinquent, commencing with the month of August. ’ ’

Section 115 provides that the franchise tax shall be a prior and first lien on the property of the corporation from and including the first day of July in each year until the tax is paid. And section 116 provides that: “In case any corporation shall fail . . . to pay the franchise tax assessed against it on or before the thirty-first day of July,” the Secretary of State shall issue a warrant directed to the sheriff of any county in the State, commanding him to collect the tax; and by section 117 it is provided that at any time “on or after the first day of August” the Secretary of State through the Attorney General may institute an action of debt to recover the tax. Section 118 provides that in case any corporation fails to pay its franchise tax “on or before the thirty-first day of July of the year in which such franchise tax becomes due and payable,” the Attorney General shall file an information for the dissolution of the corporation; and by section 125 it is provided that upon the payment of'the franchise tax, penalties and costs, the suit brought for the dissolution of the corpo- . ration shall abate.

Section 128 is as follows: “No corporation required to pay a franchise tax or fee under the laws of this State shall transact any business in this State or maintain any action at law or suit in equity, unless such corporation shall have paid such franchise tax, or such fees and penalties when the same become due and payable until such franchise taxes, fees and penalties have been paid in full. ’ ’

It is the defendants’ contention that under section 108 the franchise tax is due and payable on the first day of July of each year, and that since by section 128 it is made unlawful for any. corporation that has not paid its franchise tax to transact any business in the State or maintain any action at law or suit in equity, the plaintiff, not having paid its tax on July first when it was due and payable, could not transact any business in the State of Illinois, and therefore when it purported to sell the goods in question on July 8, the contract was void, and that section 128 further provides that in such a situation no suit can be maintained.

It has been held in this State that a contract made by a foreign corporation which had not complied with the laws of this State so as to authorize it to transact business in this State was void, and that no action could be maintained to recover on the contract even though the corporation should subsequently qualify and be licensed to do business in this State. United Lead Co. v. Reedy Elevator Mfg. Co., 222 Ill. 199; Ryerson & Son v. Shaw, 277 Ill. 524. The rule announced in the cases just cited with reference to foreign corporations that do business in this State without licenses is a harsh one and we think it should not be extended unless the law is plain. But we think that the provisions of the statute with reference to foreign corporations doing business in this State without a license, Cahill’s St. ch. 32, 94, is not the same as the law requiring a franchise tax as shown by the sections of that Act above referred to. "While it is true that by section 108 the franchise tax is due and payable on the first day of July of each, year, yet it is equally true that a corporation which fails to pay its franchise tax is not delinquent until the thirty-first day of July of each year, as section 114 specifically provides. And we are therefore of the opinion that a corporation ought not to be prohibited from transacting business before it is delinquent.

We therefore hold that the contract in question for the sale of the goods being made on July 8 was not rendered invalid by virtue of any provision of the sections above mentioned. It therefore follows that the defense interposed should have been overruled and plaintiff should have had a judgment for $422.53.

Obviously we do not pass on the question whether a contract made by a corporation that has not paid its annual franchise tax until after July 31 is or is not valid, because that question does not arise here.

The judgment of the municipal court of Chicago is reversed and judgment will be entered in this court in favor of plaintiff and against defendants for $422.53.

Judgment reversed and judgment entered in this court.

MoSurely and Matchett, JJ., concur.


text:
    Meyer Levin et al., trading as Chicago Window & Door Screen Company, Appellants, v. Sylvan Metal Products Company et al., Appellees.
    Gen. No. 33,114.
    Opinion filed March 11, 1929.
    William R. Wiley, for appellants.
    Perlman, Goodman & Scolnik, for appellees; Bernard T. Hecht, of counsel.
   Mr. Presiding Justice O’Connor

delivered the opinion of the court.

Plaintiffs brought an action to recover $80 claimed to be due them from defendants. The statement of claim alleges that defendant the Sylvan Metal Products Company, a corporation, was the general contractor with whom plaintiffs entered into a contract to furnish window screens for a building which the general contractor was constructing for the other defendants on the latters ’ property. It was sought to establish a lien on the defendants who were the owners of the real estate in question. Attached to and made a part of plaintiffs ’ statement of claim were notices which were given as required by the Mechanic’s Lien Act. The summons was served on the owners of the property but not on the general contractor. On the return day of the summons, on motion of plaintiffs, the owners of the property in question were defaulted for want of appearance and judgment was entered on plaintiffs’ statement of claim against defendants who were served, being the owners of the premises, for the amount of plaintiffs’ claim. This was on January 31, 1928. On May 9 following, defendants moved that the judgment against them be vacated, the motion was continued generally and on May 17, after a hearing, the court entered an order vacating the judgment. It is from this order that the plaintiffs appeal. Defendants, in support of their motion to vacate the judgment, submitted a sworn petition setting up that plaintiffs ’ suit was brought under section 28 of the Mechanic’s Lien Act, Cahill’s St. ch. 82 against the general contractor and the owners of the property upon which the improvement was being erected, and that the general contractor had not been served with process nor had it entered its appearance.

Section 28 of the Mechanic’s Lien Act, under which this suit was brought, provides that a subcontractor may sue the general contractor and the owners of the property and that, “all suits and actions by sub-contractors shall be against both contractor and owner jointly, and no decree or judgment shall be rendered therein until both are duly brought before the court by process.” The section further provides that any judgment rendered shall be against both jointly. In the instant case plaintiffs were subcontractors and to obtain a judgment under section 28 the law required that both the general contractor and the owners of the property should be brought before the court. This was not done, the general contractor not having been served.

It is obvious, therefore, that the court had no jurisdiction and that the judgment rendered against defendants was void. A void judgment may be attacked at any time. Rybarczyk v. Weglarz, 204 Ill. App. 232; People v. Drysch, 311 Ill. 342.

The order of the municipal court of Chicago vacating the judgment is correct and it is affirmed.

Affirmed.

McSurely and Hatchett, JJ., concur.


text:
    Jacob Edelman and Abraham Edelman, Appellants, v. F. W. Woolworth Company, Appellee.
    Gen. No. 33,124.
    Opinion filed March 11, 1929.
    Hyman Soboroff, for appellants.

      Ednyfed H. Williams and Leesman, Roemer & Schnell, for appellee.
   Mr. Presiding Justice O’Connor

delivered the opinion of the court.

Plaintiffs, as landlord, brought an action of forcible detainer against defendant, the tenant, to obtain possession of property known as 1247 and 1249 South Halsted street, Chicago. There was a trial before the court without a jury and a finding and judgment in defendant’s favor, and plaintiffs appeal.

The record discloses that the written lease under which defendant was occupying the premises in question contained the following provisions: “Lessee agrees not to sublet these premises, nor assign this lease without written consent of the lessor, but such consent shall not be unreasonably withheld.” On May 24, 1928, plaintiffs served a written notice on the defendant notifying the latter that on account of its “default in subleasing or assigning without our written consent to Samuel Bilsky . . . we, the undersigned owners of said premises, have elected to determine your lease and you are hereby notified to quit and deliver up possession of the same to us within ten days from the date of the service of this notice upon you.”

It further appears from the evidence that before this notice was served defendant had advised plaintiffs that it had completed a new store in the neighborhood into which it expected to move and would vacate the premises in question and requested that plaintiffs give their consent to the subletting of the premises to Samuel Bilsky. Witnesses testified on behalf of defendant that when this request was made plaintiffs stated that their consent would be given. On the other hand, witnesses for plaintiffs denied that any such consent was given.

The evidence further shows that plaintiffs, shortly after they were advised that defendant wished to vacate the premises and sublet or.assign the lease, offered defendant $2,000 if defendant would give up its lease. After considerable negotiations between the parties, plaintiffs refused to give their consent and shortly afterwards Bilsky moved' into the premises and began conducting his retail store on the main floor.

It further appears that Bilsky was in the same line of business as plaintiffs, whose retail store was about a block away from the premises in question.

It further appears that while negotiations were being carried on between the parties, with a view to obtaining plaintiffs’ consent to the subletting of the premises to Bilsky, correspondence passed between them and finally plaintiffs’ counsel wrote a letter to defendant in which it was stated: “Upon receipt of your letter the said Jacob Edelman and Abraham Edelman have made a personal investigation, and from such investigation find that they cannot consent to the subletting or assignment of the lease to the said Samuel Bilsky, and that any such act on your part will be considered by said owners a breach of your lease, and action will be taken accordingly.”

It further appears from the evidence that Bilsky was well known to plaintiffs for a number of years, that he was a responsible merchant in the neighborhood and carried large balances in the local banks in connection with his retail business, all of which was apparently well known to plaintiffs.

Upon a consideration of all the evidence the court held that plaintiffs had unreasonably -withheld their consent to the subletting of the premises, and judgment was entered against plaintiffs. In his brief counsel for plaintiffs, among other things, contends that the evidence shows the premises had been occupied as a 5 and 10 cent store by defendant and that this fact made the premises worth about $40,000 more than it would be if occupied by the sublessee for a cloak store; that the sublessee Bilsky was engaged in the same line of business as plaintiffs whose place of business was within a block or two of the premises in question, and he would be a competitor of plaintiffs, and that in these circumstances plaintiffs had a right to refuse to give their consent to the subletting and that such refusal was not arbitrary.

If there was no provision in the lease against subletting, defendant would have a right to sublet or assign the lease and it was to prevent this that plaintiffs had the covenant inserted in the lease — to cut down defendant’s right to sublet it ns it pleased. Houlder Bros., Ltd. v. Gibbs, L. R. [1925] 1 Ch. 575.

The provision against subletting is to be construed most strongly against the landlord, and if, in the-instant case, plaintiffs had desired to prevent the subletting of the premises to a business competitor they should have so stated in the lease. Not having done so, we think their objection to the subtenant, namely, that he would be a business competitor of plaintiffs, was arbitrary and unwarranted.

The judgment of the municipal court of Chicago is affirmed.

Affirmed.

McSurely and Matchett, JJ., concur.


text:
    Leonard H. Roach, Appellant, v. Anna R. Ward et al., Appellees.
    Gen. No. 33,133.

      Opinion filed March 11, 1929.
    Robert F. Kolb and Luther W. Tatge, for appellant.
    McCulloch & McCulloch, for appellee Anna R. Ward; Grover C. McLaren, of counsel.
   Mr. Presiding Justice O’Connor

delivered the opinion of the court.

Leonard H. Roach filed his bill of complaint praying that a written contract entered into between him and defendants, whereby defendants agreed to execute and deliver to complainant a 99-year lease on certain real estate in Chicago be reformed and specifically enforced. The case was heard before the chancellor, and at the close of complainant’s case a decree was entered dismissing complainant’s bill for want of equity and he appeals.

The record discloses that on September 22, 1926, Margaret E. Ward, her daughter Anna R. Ward, and her daughter-in-law Margaret C. Ward owned a certain piece of real estate at the southeast corner of Randolph and DesPlaines streets in Chicago; that Margaret E. Ward and Anna R. Ward, her daughter, owned an undivided eight-ninths of the premises, the remaining one-ninth being owned by the daughter-in-law, Margaret C. Ward.

On September 22, 1926, complainant, his representative, Frank B. Reed, Anna R. Ward and James A. Ward, husband of Margaret C. Ward, met at the office of the Chicago Title and Trust Company and after discussing the question of leasing the premises Reed wrote out the document which complainant seeks to reform and for a decree specifically enforcing the document as reformed. It is as follows:

“Chicago, Sept. 22nd,'1926.
“Received of Leonard H. Roach, Five Hundred Dollars ($500.00) as earnest money for the execution of a ninety-nine year lease on the property located at South West corner of Randolph and DesPlaines St. having a frontage of 65 feet on Randolph St. by 75% feet on Des Plaines St.
“The rental to be $2500.00 per annum for the first twenty-five years — and $3,000.00 per annum for the balance of said ninety-nine years payable quarterly in advance — said rental to be net to lessor.
“Lessee to give acceptable bond or deposit securities in the sum of Ten Thousand Dollars ($10,000) till such time as he erects new building on said property, free of all mechanics liens.
“Said rental to be due and payable from date of delivery of lease — and deal to be consummated not later than November first, 1926 — Taxes for the year 1926 to be prorated on basis of 1925 taxes.
“The lease to provide that above mentioned improvement shall not be removed without consent of lessors and satisfactory security deposited in escrow in an amount acceptable to lessors. If cost of 1st new building exceeds $20,000.00 (Twenty) additional security to be deposited to an amount of 50% of such additional cost. Margaret E. Ward,
per Anna R. Ward.
“Margaret C. Ward,
by James A. Ward.
“O. K
“Leonard Roach,
545 Lake St.”

The evidence shows that when the document was written Anna R. Ward signed her mother’s name to it and that James A. Ward signed his wife’s name, Margaret C. Ward; that it, together with $500 of Roach’s money, was left in escrow with the Chicago Title and Trust Company and two typewritten copies of the document were then prepared and taken away by the Wards, one of them being afterwards signed by Margaret C. Ward and her husband, James A. Ward, and the other by “Mrs. Margaret E. Ward.” Afterwards there were some negotiations between the parties and their attorneys with reference to the preparation of the 99-year lease mentioned in the written document, and some time later Anna R. Ward refused to consummate the transaction, stating that she had not signed the document of September 22,1926.

To the bill of complaint filed in the instant case she pleaded' the statute of frauds. The evidence further shows that on September 24, 1926, Reed, who was the broker in the case, wrote Anna R. Ward a letter as follows:

“From the commissions due to me on consummation of ninety-nine year lease of South East corner of Des Plaines and Randolph Street to Leonard H. Roach, please pay to the order of myself the sum of Seven Hundred Dollars ($700.00). F. B. Reed.
“Accepted as payable when lease is delivered otherwise this acceptance is null and void.
Ahha R. Ward.”
And that on October 1, 1926, Anna R. Ward joined in a mortgage with the other Wards in which it was stated that the mortgage was “subordinate to a certain ninety-nine year lease between the undersigned and Leonard H. Roach, dated or to be dated on or about the 1st day of October, A. D. 1926.”

Other evidence was introduced tending to show that •'there was a mutual mistake in the written document of ‘September 22, 1926, wherein the property was described as being located at the southwest corner of Randolph and Des Plaines streets when it should have described the property as being located at the southeast corner of said streets.

Section 2 of chapter 59, Cahill’s Statutes, provides that no action shall be brought upon any contract for the sale of lands or any interest therein for a term longer than one year, unless the contract or some memorandum or note thereof shall be in writing and signed by the party to be charged.

It is undisputed that Anna R. Ward never signed her name to the document of September 22,1926, which complainant seeks to have specifically enforced. But complainant contends that when Anna R. Ward, at the office of the Title and Trust Company, signed her mother’s name, by herself, to the document she stated to those there present that she had signed the document and that thereby she adopted her mother’s name as that of her own. In support of this numerous authorities are cited to the effect that a person may adopt any name, style or signature he or she chooses; but we think none of these cases is in point. There was no fictitious name or corporate name or trade name or partnership name used by Anna' R. Ward, such as was the fact in the cases cited. The evidence simply shows that Anna R. Ward signed the document “Margaret E. Ward, per Anna R. Ward,” Margaret E. Ward being Anna R. Ward’s mother. The document not having been signed by Anna R. Ward it is unenforceable under the statute above referred to. Nor do we think that it is rendered enforceable by the fact that Anna R. Ward subsequently signed the order to pay the commission and the trust deed or mortgage above mentioned. We think neither of these nor both of them is such a note or memorandum as required by section 2 of the statute above mentioned.

Moreover, the three documents taken together are entirely too uncertain and indefinite to warrant a court of chancery to decree specific performance. The document of September 22, 1926, does not indicate in any way that Anna R. Ward was a party to it. It provided that the lessee was to give an acceptable bond or deposit securities in the sum of $10,000 till such time as he erects a new building on the property. It will be noted that there is no provision defining the terms or conditions of the bond or deposit nor is there anything stated as to how the bond or security may be enforced. There is no time fixed for the giving of the bond or the making of the deposit of the securities or the erection of the building nor is there sufficient in the document of September 22 to show what was required to be included in the 99-year lease thereafter to be executed.

From a consideration of the entire record we think it clear that no court of chancery could properly enter a decree for the specific performance of the contract, and in these circumstances the decree of the superior court of Cook county is affirmed.

Affirmed.

McSurely and Matchett, JJ., concur.