author: Mr. Justice Burke

text:
    People of the State of Illinois ex rel. Oscar Nelson, Auditor of Public Accounts of the State of Illinois, Plaintiff, v. Central Manufacturing District Bank, Defendant. Augusta Oglesby, Executrix of Last Will and Testament of John G. Oglesby, Deceased, Appellant, v. Charles H. Albers et al., Appellees.
    Gen. No. 41,180.

      Opinion filed June 19, 1940.
    Charles C. LeForgee and William M. Rice, both of Decatur, for appellant.
    Healy & Reid, of Chicago, for certain appellee.
    Miller, Gorham, Westgott & Adams, of Chicago, for certain other appellees.
   Mr. Justice Burke

delivered the opinion of the court.

On June 24,1932, the auditor of public accounts closed the Central Manufacturing District Bank (a state bank having its principal place of business at 1112 West 35th street, Chicago), as an insolvent association, and appointed a receiver therefor. On August 6, 1932, an order for the dissolution of the bank was entered in the circuit court of Cook county, which order also confirmed and approved the appointment of the receiver. On May 18, 1933, pursuant to leave of court, John J. Oglesby, filed his intervening petition in chancery against the receiver, setting forth his claim in the sum of $105,750 and accrued interest thereon, praying that the claim be allowed by the court as a preference, that the receiver be ordered to pay the claim from the assets of the bank, and that he be granted such other relief as might be just and proper. The receiver filed his answer and the cause was referred to a master in chancery. On August 7, 1935, a depositors’ committee filed its petition for leave to intervene and defend against the claim. On December 12,1938, pursuant to leave of court, Oglesby filed his amended intervening petition and the receiver filed his answer thereto. The matter was heard by the master upon the amended intervening petition and the answer thereto. After the hearing before the master, but prior to the issuance of the report, John Gr. Oglesby departed this life, and upon the suggestion of his death to the court, Augusta Oglesby, executrix of the last will and testament of John Gr. Oglesby, deceased, appellant herein, was substituted as intervening petitioner. On December 12, 1938, the master filed his report, recommending that the amended intervening petition be dismissed for want of equity, and that the costs be assessed against the petitioner. The executrix filed her objections, which were overruled by the master. The chancellor entered an order allowing the objections to stand as exceptions. On December 12, 1939, the chancellor overruled the exceptions and dismissed the amended petition for want of equity at petitioner’s cost, to reverse which this appeal is prosecuted.

Appellant’s theory of the case is that the bank, over a period of about 10 years, acquired for and sold to John Gr. Oglesby numerous and divers notes and bonds secured by Chicago real estate, and that at the present time appellant holds such bonds and notes of a face value in excess of $100,000; that in connection with the sale of such securities to Oglesby the said bank intentionally concealed certain material facts and made certain wrongful representations to Oglesby, which vitiated the transactions and gave Oglesby the right, power and authority to rescind the said transactions and receive back the money he had paid to said bank for the securities; that Oglesby did rescind said transactions and admittedly tendered said securities to said bank and to the receiver for said bank; that apart from the actual wrongful concealments the evidence shows that a fiduciary relationship existed between the Central Manufacturing District Bank and John O. Oglesby which relationship was created by the representations and conduct of said bank; that said bank violated the confidence which it had inspired and which it well knew that Oglesby reposed in it; that said bank concealed and suppressed numerous and divers material facts from Oglesby; that said bank admittedly acted as agent and broker in buying securities for him, when in fact and without Oglesby’s knowledge, the bank was acting for itself and for numerous and divers issuers and borrowers from the bank, and that out of said transactions the bank was receiving profits and benefits without Oglesby’s knowledge other and in excess of commissions as broker’s fees; that because of the bank’s conduct, its dual agency, and the subsequent abuse of this confidence, the bank secured and now holds the money Oglesby paid to it for said bonds as a constructive trustee; that appellant is, therefore, entitled to recover the sums paid, together with interest thereon. Appellees’ theory of the case, as stated in appellant’s brief, is that the bank’s conduct was not fraudulent and that no fiduciary relation existed between the said bank and Oglesby; that the bank did not act as agent in purchasing securities for him, but that the relation between Oglesby and the bank was simply that of buyer and seller, and that the evidence in this case does not justify a holding that the bank holds or ever held the funds as constructive trustee.

Appellant states the law relative to fraud, constructive trust and fiduciary relationships. A constructive trust may be defined as the device used by chancery to compel one who unfairly holds money or property to' convey such money or property to another to whom it justly belongs. When a court of equity finds a defendant is holding money or property which it acquired by unjust, unconscionable or unlawful means, it will raise a trust and take such interest from the defendant and vest it in the wronged party. Any transaction may be the basis for creating a constructive trust where for any reason the defendant holds funds which in equity and good conscience should be possessed by the plaintiff. In the case of Warren v. Pfeil, 346 Ill. 344, at p. 360, our Supreme Court said: “A fiduciary relationship is not limited to cases of trustee and cestui que trust, guardian and ward, attorney and client, and other recognized legal relationships, but extends to every possible case in which there is confidence reposed on one side and a resulting superiority and domination on the other. The origin of the confidence may be moral, social, domestic or merely personal. If the confidence in fact exists and is reposed by one party and accepted by the other the relation is fiduciary and equity will regard dealings between the parties according to the rules which apply to such relation. ’ ’ Appellant supports his statements as to the law governing the case by ample authority. Appellees do not challenge the statement of the law as set out in appellant’s brief. They assert that the issue is as to whether there was a fiduciary relationship giving rise to a constructive trust. We agree with appellees that in order to determine the proposition we must examine the facts.

The master found that the bank did not act as an investment agent for petitioner; that there was no fiduciary relationship, and that the relationship was that of seller and purchaser; that petitioner knew that the bank was an underwriter for securities and was deriving profit from the sale thereof. The master also found that Oglesby was in no different position than were thousands of other persons who bought securities from hundreds of banks. Oglesby was a farmer by occupation, though in the past he had held the positions of Governor’s private secretary, legislator and lieutenant governor. He had never lived nor been engaged in any business activities in Chicago, and he had never at any time maintained a deposit, nor been a client or customer of the bank. Oglesby was and had been for a number of years a personal, political and social friend and associate of David E. Shanahan, a director of the bank. Mr. Shanahan later became chairman of the board of the bank, and was at all times a controlling factor in its affairs. During a conversation between Shanahan and Oglesby in 1922, Shanahan urged Oglesby to make investments through the bank, and further urged Oglesby that if he had any money to invest he would do well to get in touch with Frank L. Webb, an officer of the bank, and that Webb and the bank would take full charge of the matter for him. Oglesby did not at that time know the bank, nor did he know any of its officers. Thereafter Oglesby telephoned Webb, who was the cashier, and told him what Shanahan had said. Oglesby testified that Webb then told Oglesby that he would be very glad to buy securities for him, that he realized that he (Oglesby) knew nothing whatever about the values of.Chicago real estate, but that he (Webb) would take full charge of whatever money Oglesby had to invest, and that Oglesby would be assured that he (Webb) would buy only safe and sound securities for him. Oglesby testified that he believed and completely relied upon the representations.of Webb and Shanahan, and thereafter a great many investments were made. The usual procedure for making these investments was as follows: Oglesby, who lived at Elkhart, Logan county, Illinois, would contact Webb, usually by telephone but sometimes by letter, advising Webb how much money he had to invest. Thereafter, Webb would advise Oglesby what securities he had purchased for him and the price at which they had been secured, and Oglesby would thereupon send his check payable either to the bank or to Webb. Occasionally the bank would write Oglesby recommending one or more issues to him and asking him if he had a preference, and Oglesby would reply by ’phone or letter advising the bank to purchase some or all of such recommended bonds, or if he had no funds to invest, he advised them that he did not wish to purchase such bonds. As to a great many of the securities so purchased by Oglesby, the bank gave Oglesby written agreements, promising to repurchase from Oglesby the securities purchased for him at his option at par, plus accrued interest. On all occasions where Oglesby requested such agreements from the bank, they were given to him, and finally in November, 1929, the bank wrote Oglesby advising him that it would repurchase at 99, plus accrued interest, any mortgage purchased by him. On April 5,1932, Oglesby wrote to the bank that “in conformity with your repurchase letter to me dated November 12,1929,1 hereby present to you for such repurchase at 99 and accrued interest to date of April 11, 1932, the following mortgages purchased on your bank, ... I tender these bonds because I am in need of funds. Kindly advise me. ’ ’ The letter mentioned five mortgages. Neither the bank nor its officers replied to the letter and on May 31, 1932, Oglesby again wrote to the bank as follows:

“Dear Mr. Webb: ... I have purchased from your bank in the past many bonds which carry a repurchase agreement of your bank that on such and such a time these bonds will be repurchased by your bank at par and accrued interest. This was and is part of the original contract when you sold the bonds to me.

“I notice that you say you feel proud of the record of your investments with me. I am glad you do so. Do you mean that because in the natural transaction of business when you have sold bonds to me making your underwriting fees and your commission thereon, and I paying you full price for same, that when the bonds mature and are due that I should feel that you have granted me a favor, if they are paid? And, remember, that you are the only investment house with which I have transacted business that has refused at all times to allow me the usual bank director’s concession, and, further, that none of your bonds carry prepayment of the normal tax.” The bank did not reply in writing to this second letter but Webb telephoned Oglesby and asked if he and Mr. Hoebel, another official of the bank, might come down to see him. Thereafter, on June 8, 1932, Webb and Hoebel came to Elkhart and talked to Oglesby for four hours. Oglesby testified that these officers did not disclose to him the part the bank really had played in the transactions, nor did they advise him of the then financial interest of the bank in the bonds. He further testified that at that time Webb and Hoebel went over all of the investments with him and told him the investments were safe and assured him they would be taken up by the bank under the repurchase agreements, that he need not worry as the bank would take care of it; that they told him they would take the matter up with the board of directors as soon as they returned to Chicago, and that if he would wait a few days he would receive his check. He also stated that during this conversation he told these officers that he had relied upon them and that he thought it strange that they had not answered his letters, and that he had made up his mind to communicate with the president of the bank; that thereupon Webb and Hoebel again assured him that he need not worry, that they had been representing him fully, and that the securities were all in good shape and would be taken over by the bank. Shortly thereafter the bank was closed by the State auditor and a receiver appointed. The securities were tendered to the bank before it was closed and later to the receiver, and the tender was in each case refused. Appellant contends that it is clear from the evidence that Oglesby did not select or choose the securities supposedly purchased for him by the bank; that they were selected by the officers of the bank, and that in most instances he first knew of the transactions when the bank advised him they had purchased these securities for him; that there were exceptional instances in which the bank selected two or more securities, limited always to those the bank had on hand in its own portfolio, and in substance asked him to express a preference as to those one or two securities on the submitted list. Appellant also asserts that the evidence shows that the bank did not at any time purchase securities for Oglesby in the broad and unrestricted field of investments; that all of the securities acquired by the bank for him were within a limited and restricted field and were either securities where the bank owned the entire issue outright, or were securities which the bank was engaged in marketing for some mortgagor or borrower from the bank; that the interest of the bank in the securities turned over to him was not really a brokerage commission, but was in fact the profit arising out of transactions originating in the bank for the purpose of securing profits as promoter, both in creating the loans and distributing the bonds it so created; that neither the bank nor its officers ever informed Oglesby it was selling him bonds which the bank owned, or bonds in which it was acting for the borrower and marketing the bonds for such borrower and receiving the profits and emoluments for representing both the buyer and the seller; that in fact the bank and its officers repeatedly assured Oglesby that it represented him and him alone, and that he had no knowledge of the dual activities of the bank.

The record discloses that with respect to bonds, such" as were subsequently acquired by Oglesby, the practice was that when the bank decided to make a real estate or construction loan, the bank advanced the total sum to the borrower and opened an account with respect to each issue separately under the general caption “Real Estate Loans ” or “ Real Estate Bonds and Mortgages, ’ ’ an asset account of the bank, and on this separate account for each issue, the initial acquisition by the bank would be charged as a debit for the entire amount of the issue. The corresponding credits were the amounts made available to the debtor, the bank’s profits (which were equivalent to 2% per cent to 5 per cent of the face of the total issue), and other expenses in connection with the making of a loan, such as printing and abstract charges. Everything in connection with the making of such loans was under the direction, management and supervision of the bank. The bank was the controlling force behind the entire procedure down to the smallest details, including supervision and approval of plans, appraisements, examination of abstracts and drafting of papers, with practically nothing left but for the mortgagor to sign and the investor to pay. The bank records disclose that after so acquiring the bonds the bank sold the bonds to various and sundry patrons, and that in many instances the bank would thereafter deal actively in such issues by repurchasing and then reselling such bonds. These transactions were never at a loss to the bank. In at least four instances the bank repurchased such bonds from other investors and resold the same bonds to Oglesby at par. Appellant contends . that the evidence shows that the bank in many instances made loans far in excess of the fair appraised market value of the property securing such loans, and thereafter sold the bonds at par to Oglesby and others. Oglesby never made any investigation as to the securities or their values. He testified that he did not make any investigation for the reason that he had the positive unequivocal assurances that his money was safely invested, and that he could have no loss, and that the assurance was evidenced by the repurchase agreements given him by the bank. With regard to the interest on the various bonds and other securities sold to Oglesby, the bank kept two ledgers headed ‘ Sundries Receivable” and “Sundries Payable.” When the holder of an interest coupon presented such- coupon for payment the bank would pay the interest due the holder of the coupon regardless of whether or not the mortgagor had deposited the interest with the bank. If the mortgagor had already paid the interest to the bank the mortgagor’s account in the “Sundries Payable” ledger would be credited and the payment would be charged against that credit. If the mortgagor had not paid the interest, the bank would nevertheless pay the interest to the holder of the coupon, and would then set up an account for the mortgagor in the “Sundries Receivable” ledger, and would debit such account with the amount of interest so paid. When and if the interest was actually paid by the mortgagor the bank would credit the mortgagor’s account in the “Sundries Receivable ’ ’ ledger. The bank records showed and Mr. Webb, the cashier, testified, that it was “the universal custom of the bank to pay the interest to the holders of interest coupons upon presentation whether or not the mortgagors were in default.” The bank records also disclosed that in some instances the bank advanced instalments of principal as well as interest when the mortgagors were in default, and that in many instances the bank never recovered from the mortgagors this interest and principal so advanced and paid; that on numerous occasions the bank paid interest to Oglesby on bonds held by him when such interest had not been paid by the respective mortgagors, and when such mortgagors were in fact in default. The record also shows that the bank never informed Oglesby when it so advanced interest to him, that the mortgagors had not paid the interest and were in default, and that Oglesby had no knowledge when he received such interest payments that the mortgagors had not paid and were in default.

Appellant argues that the bank’s acts and conduct in selling securities to Oglesby and thereafter concealing from him the fact that the mortgagors, or signors of the securities, were in default, by itself paying the interest due him, amounts to actionable fraud, and standing alone without any of the other facts in the case, entitles him to the relief prayed in the amended petition, and asks us to remember that Oglesby knew nothing about Chicago real estate values and that the bank knew his lack of such knowledge, and that the bank repeatedly told him that it was selling him only safe and sound securities and that he need not concern himself with or worry about the investments. Appellant declares that the purpose of the bank in concealing from Oglesby the various defaults was to disarm him into not only continuing to hold the securities he possessed, but to continue to invest additional large sums through the bank. Appellant concludes that the fact that when the bank was closed and Oglesby was holding securities which the bank had sold him with face values in excess of $100,000, showed that the “scheme” succeeded; that the concealment of the defaults lulled Oglesby into a sense of false security, and induced him not only to retain the securities already in his possession but to invest additional large sums; that he did not institute foreclosure or other proceedings as he would have had the right to do if the bank had not paid the interest, and that he did not request the bank to take up the securities at par plus accrued interest as it was at least morally bound to do under its written agreements with him. In support of her argument appellant cites Continental Ins. Co. v. Mercadante, 222 App. Div. 181, 225 N.Y.S. 488; First Trust Co. of Lincoln v. Carlsen, 129 Neb. 118, 261 N. W. 333; Marshall & Ilsley Bank v. Guaranty Inv. Co., 213 Wis. 415, 250 N. W. 862.

Appellant advances the proposition that under the undisputed facts in the case a fiduciary relationship existed between the bank and Oglesby at the time of all the transactions in question. In support of this contention appellant calls our attention to the fact that in the first place Shanahan, a personal friend of Oglesby and a director of the bank, brought up the subject and solicited Oglesby to see Webb; that after the Shanahan interview Webb and other officers and employees of the bank repeatedly told Oglesby that they knew he knew nothing whatsoever about investment values and Chicago real estate values, but that they would buy securities for him and would buy only securities that were perfectly safe and sound; that they would act for him and that he need not worry at all about the purchases they would make for him; that the manner in which the transactions were handled, considering Oglesby’s known lack of knowledge of Chicago real estate and investment values, conclusively shows that Oglesby did repose complete confidence in the bank and its officials; also, that the repeated assurances given him by the bank officers that they were acting for him, and the other facts previously mentioned, shows conclusively that the bank knew of the confidence reposed and accepted it, and in fact did everything in its power to create and hold the confidence. Appellant also discusses the effect of the opinion in Knass v. Madison & Kedzie State Bank, 354 Ill. 554, filed December 22,1933, rehearing denied February 8, 1934. She asserts that Mr. Oglesby was a layman and thought that the repurchase agreements were perfectly valid, and that the bank would repurchase the bonds from him in accordance with its written agreement with him so to do; that in fact the bank did repurchase securities from him in accordance with a number of such agreements; that while appellant is not seeking to enforce the repurchase agreements (having rescinded the entire transaction and tendered back the bonds and demanded the money from the receiver), nevertheless, the giving of the repurchase agreements, and the repurchasing by the bank in a number of instances in accordance with their terms, even though the repurchase agreements were ultra vires and void, accomplished as much in inspiring and holding the complete confidence of Oglesby as if the repurchase agreements had been perfectly valid and fully enforcible; that the repurchase agreements were of the utmost importance, not because they are ultra vires and void instead of being fully enforcible, but because they were voluntarily issued by the bank to Oglesby as an inducement to him to rely upon such unauthorized instruments rather than upon the values of the properties securing the loans; that the agreements were a part of the bank’s scheme, probably the most convincing part, which induced Oglesby to accept the assurances of the bank that his money was safely invested. Appellant also asks us to note that in addition to failing to disclose to her husband that the bank acted as an undisclosed principal in the issuance, underwriting and selling of the bonds it purportedly bought for him, profited by such issuance, underwriting and sale, as well as that it was acting as underwriting and sales agent for innumerable borrowers from the bank in the same transactions, the bank did in many instances repurchase at a discount bonds that it had previously underwritten and sold to other investors, and thereafter sold such repurchased bonds to him at par, without disclosing any of such facts to him. Appellant also states that the evidence shows that the amount of the loans made by the bank on particular properties was excessive from the standpoint of investment safety; that in some instances the loans were actually in excess of any fair appraised value of the premises, and that the conduct of the bank in making loans in excess of the fair appraised market value, thereafter representing to Oglesby that the loans were absolutely safe and sound and were well secured, constitutes actionable fraud, and is one of the many devices employed by the bank in inducing him to invest his money through the bank.

Appellant urges that it is apparent from the record that Oglesby did not know the following: 1. That the transactions out of which the securities arose originated in the bank and from beginning to end were managed and controlled exclusively by the bank. 2. That the bank received profits as promoters in the creation of these securities as well as profits in the distribution of such securities and was the owner of all these securities. 3. That the values placed on the properties securing the notes and bonds were fixed by the bank and that in many cases the values of the properties were less than the face value of the securities issued. 4. That the bank advanced principal and interest instalments when the borrowers were in default and thereby concealed such defaults from Mr. Oglesby and other investors. 5. That the bank’s representations to Oglesby that his money would be and was safely invested and that the bank was fully representing him were untrue. In conclusion appellant insists that she has shown by clear and convincing evidence that the bank was guilty of fraud in its dealings with her deceased husband; that a fiduciary relationship existed between them at the time of all the transactions in question; that appellees have not only failed to establish the fairness of the bank’s dealings with him by clear and convincing evidence, but that on the contrary the evidence clearly discloses that the bank took unconscionable advantage of him and grossly abused the confidence so reposed; that the bank acted in a dual capacity for its own gain without disclosing such facts to him; that appellant has rescinded the contract and tendered back the property to the bank and to the receiver, and that the receiver holds the money which Oglesby paid to the bank as a constructive trustee for her.

In support of the decree, appellees maintain that in the original petition Oglesby based his claim on certain repurchase agreements. We have examined the petition, which is verified, and find that it is grounded on the repurchase agreements and not on charges of fraud and a fiduciary relationship giving rise to a constructive trust. While the case made by the original pleadings was being heard before the master, the Supreme Court rendered its decision in Knass v. Madison & Kedzie State Bank, supra, holding that repurchase agreements by banks were ultra vires and void and against public policy. The petition for rehearing in that case was denied on February 8,1934. On December 12, 1938, by leave of court, Oglesby filed his amended petition. The original petition was signed and sworn to by John G. Oglesby. The amended petition is based on a different theory than the original petition. It alleges that Oglesby did not have any knowledge that the bank owned or was in any way interested in the securities, prior to the closing of the bank. It also relies on a fiduciary relationship between the bank and Oglesby and the abuse of that relationship. It also relies on allegations of fraud and maintains that the facts alleged give rise to a constructive trust. Appellant replies that there is in fact no material inconsistency between the original and the amended petition, and that in any event it is an elementary rule that where, as here, an amended pleading is complete in itself and does not refer to or adopt a prior pleading, it supersedes it and the original pleading ceases to be a part of the record. Appellant also argues that the Knass case expressly recognizes the right of an investor to repudiate repurchase agreements where there has been actual fraud, or the abuse of a fiduciary relationship and to recover back the funds so acquired by the bank. We agree that as a matter of pleading, appellant is right in his contention that where an original pleading is amended by another pleading which is complete in itself, making the original pleading a part of the amended pleading, the original pleading, though it is still a part of the record, is superseded by the amended pleading and is no longer a part of plaintiff’s averments. (Maegerlein v. City of Chicago, 237 Ill. 159.) We are of the opinion, however, that verified allegations may be introduced as admissions. .The admissions of a party to a fact, no matter how made, may be given in evidence against him. Common law pleadings are admissible in evidence. (Soaps v. Eichberg, 42 Ill. App. 375.) It has been held that even though an original answer has been withdrawn by leave of court and an amended answer filed, admissions in the first answer are competent evidence against the defendant filing the same. People’s Bank v. Wood, 207 Ill. App. 602; Parish v. Bainum, 202 Ill. App. 563. In Blakeslee v. Blakeslee, 265 Ill. 48, p. 52, the court said:

“In the original answer filed by appellant she admitted she and appellee were tenants in common and that he was entitled to partition. Appellant contends that this answer is not entitled to be considered and ought not to prejudice her, because it was withdrawn by leave of the court. Appellant’s position, in effect, is, that the answer should be treated as one wherein an admission has been improvidently made and the party making it has been relieved of its effect by order of the court. This would be true if the order were based upon an affidavit that the admission was made under a misapprehension or by mistake. (Maher v. Bull, 39 Ill. 531.) Appellant calls attention to the fact that it does not appear from the record that no such affidavit was filed. The record shows that on motion of the solicitor for appellant it was ordered she have leave to withdraw her original answer, file an amended answer instanter, and that the master hear the evidence and report his conclusions upon the issues made by the bill and amended answer. No order was made relieving the appellant from the admission made in her answer, and we would be unwarranted in assuming that the order made was based upon an affidavit that the admissions in the answer were improvidently made. If that were the fact it should be shown by the record. ’ ’ The record does not show that the order granting leave to file the amended petition was based upon an affidavit that the admissions therein were made under a misapprehension or by a mistake. The rule is recognized in section 35 of the Civil Practice Act (par. 159, ch. 110, Ill. Rev. Stat. 1939 [Jones Ill. Stats. Ann. 104.035]) which states that “verified allegations shall not constitute evidence except by way of admission.” We agree that appellant having filed an amended petition, has the right to have his case considered on the basis of that amended petition. However, it is the duty of the court in deciding the case also to consider any admissions made in the original verified petition. It is obvious that the reason why petitioner changed the theory of the case and also the statement of the underlying facts was because of the opinion in the Knass case. In a letter dated May 31, 1932, Oglesby wrote to the bank: “Do you mean that because in the natural transactions of business, when you have sold bonds to me, making your underwriting fees and your commissions, and I paying you full price for the same — remember that you are the only investment house with which I have transacted business that has refused at all times to allow me the usual bank director’s commission.” Here he shows knowledge that the bank was making underwriting fees and commissions and he also refers to the fact that the bank sold bonds to him. He also mentions that he is a bank director. In a letter dated August 1, 1922, 10 years before the bank closed, Oglesby indicated that he knew about the bank charging commissions, for he spoke of “such commission to your bank as will allow me 5½% instead of 6%.” Appellees cite the following extracts from letters to support their argument that Oglesby never considered the bank as his agent and that he used his own judgment in the purchase of securities in spite of the repurchase agreements: September 7, 1924 — “Have you any new issues or other suggestions for further investment.” February 6, 1930 — “Don’t believe I’ll take loan 1941. ” May 22,1930 — “Hoebel sent me Cook County Special Assessments. I don’t want them as they are mixed up in tax muddle. ’ ’ May 23,1930 — ‘ ‘ The warrants are Cook County and tied up in present tax muddle. Don’t want them as interest will be delayed. ’’ April 23, 1932 — “Sure your bonds have been good so far. Why not? You and your officers highly recommend them. I bought of you heavily. You declined all concessions to me buying in lots and your bank the only one that did.” Appellees also call attention to the wording of the repurchase agreement: “In consideration of your purchase from us we hereby agree to repurchase these bonds.” “November 12, 1929 — This bank highly recommends and agrees to repurchase any time before maturity at 99, and accrued interest to date, any mortgage purchased from us. ” In a letter of May 14, 1932, Oglesby demanded fulfillment of the repurchase agreements. Oglesby did not at any time turn over to the bank any money to invest at its discretion, nor did he at any time have a deposit in the bank. In each instance the bank submitted a list of securities, or presented data as to one or more securities, and then he made a selection therefrom and sent on the payment for the securities. In most cases he purchased only part of an issue.

Appellees insist that all the transactions were sale and purchase transactions and not investments by the bank as an agent for petitioner, and that in every instance he purchased the security. They also contend that in each instance payment was only made on delivery, and that Oglesby was in no different position than were thousands of people who bought securities from banks and investment houses. We have carefully considered the evidence and the arguments of the parties and the cases cited, and are convinced that the appellees are right in their contentions. We are of the opinion that the transactions between the bank and Oglesby involved a sale by the bank and a purchase by him, and that the bank was not his agent, and that a fiduciary relationship did not exist between him and the bank. The record clearly shows that he knew in each instance that he was making a purchase. The transactions took place at a time when values were on a higher basis than at the present time, and we must view the situation according to the values of real estate and conditions existing at the time of the transactions. Oglesby was a bank director, intelligent, and a man of standing in the community. He sought to protect himself against bad investments by procuring the repurchase agreements. We agree that the repurchase agreement could not be used for the purpose of disarming him from being watchful of his interests, and the fact alone that the repurchase agreements were given would not prevent relief against fraud or the raising of a trust in an appropriate case. We are of the opinion, however, that the record in this case does not show fraud or a breach of trust. It is apparent that Oglesby knew that he was dealing with the bank as an investment house and that the bank was selling its own “underwritings.” He also knew that the bank was getting commissions. In fact, in a letter he asked the bank to remember that it was the only investment house with which he had transacted business that had refused to allow him the usual bank director’s commission.

We now pass to that part of the case dealing with the alleged action of the bank in concealing defaults in the payment of interest. Appellees argue that the evidence does not sustain the assertion that the bank ever concealed any defaults from Oglesby, or that he was ever misled or suffered any damage due to any payment of interest by the bank. We have read the cases cited by appellant but are of the opinion that they do not lend support to her argument. They do support the rule that where a trustee conceals or fails to give notice of a default, and the holder of the mortgage is thereby damaged, the trustee may be liable for such damages. They do not hold that the original deal could be rescinded because of the subsequent conduct of the trustee in concealing or failing to give notice of the default. It is not shown that Oglesby was delayed or that he failed to foreclose or take other suitable action because of the advancement of interest by the bank. The record does show that he did not take any action because it was his position that it was the duty of the bank to live up to the repurchase agreements. In answer to the contention of appellant that as a result of the bank’s concealment of the defaults Oglesby was lulled into a sense of false security which induced him to retain the bonds he had bought and to buy others, let us look into the facts. The practice of the bank was to pay interest coupons whether or not the interest had been received from the mortgagor. In some accounts the items for collection were presented and paid by the bank before the mortgagor had paid the money, in which case the items would be charged to his account until paid. Petitioner’s witness, Murphey, gives the Zack Building as an illustration. Coupons for $210 fell due December 26, 1931. They were paid by the bank on January 6, 1932. The mortgagor paid the bank on January 25, 1932. The witness further testified that sometimes the borrowers would pay the money within a few days or a few weeks after maturity, and in other cases would never pay the interest, and when the bank closed there were substantial amounts owing to the bank by reason of such advances. This statement by the witness was general. With respect to Murphey’s testimony as to the specific securities held by petitioner, there are 10 separate items. These do not constitute all of the securities bought from the bank by petitioner. As to only 4 of these is there testimony as to advancements of interest by the bank. There is no evidence of such advancements as to the other 6, or as to any of petitioner’s other securities. Hence, there are only 4 to which appellant’s contention could possibly apply. As to these 4, no injury or damage is shown. In 2 of the 4 the advancements were repaid by the mortgagor. We are satisfied that the evidence does not sustain appellant’s contention that Oglesby was lulled into a sense of false security by reason of any concealment by the bank, and thereby induced to retain bonds he had purchased and to buy others. We also agree with the contention of appellees that there was no fiduciary relationship between the bank and Oglesby. The securities were first acquired with the bank’s own money. They were bought, riot for the purpose of selling them to Oglesby, but for the purpose of investing the bank’s money and then offering them for sale to the public. The good faith of the bank in loaning its money and taking the security is not questioned. It has not been shown that any of the mortgages or bonds were poorly secured when the values at the time the loans were made, are considered. When the securities were acquired by the bank and became its property they were offered for sale to the public. Lists were sent to customers and others, and from these lists customers chose. Oglesby bought the same as other customers did. In many instances he bought only part of an issue. The balance was sold to other customers or retained by the bank. It cannot be successfully contended that the fact that Shanahan solicited the patronage of Oglesby, established a confidential relationship. As pointed out by appellees, thousands of persons have been solicited and have opened up accounts in banks on the assurance of bank officials that the deposits would be safe, but no court has held that because of such solicitation or assurance any agency or confidential relation existed, or that a constructive trust arose. Our courts have uniformly held that the relationship was that of debtor and creditor. It is a matter of common knowledge that part of the business of banks is the loaning of money on real estate and charging commissions on the loans; that these securities were then offered for sale and sold; that buyers were solicited and told that the securities were good and safe. In the instant case the loans were likewise made in the usual course of business after due investigation. We are of the opinion that at the time the respective securities were sold to Oglesby, the bank officials believed them to be safe.

After a thorough consideration of the case, we are convinced that in effect petitioner is attempting by indirection to enforce the invalid repurchase agreements. For the reasons stated, the decree of the circuit court of Cook county is affirmed.

Decree affirmed.

Denis E. Sullivan, P. J., and Hebel, J., concur.


source: Caselaw Access Project

license: Public Domain

text:
    J. P. Hassey, Appellant, v. A. C. Allyn and Company, Appellee.
    Gen. No. 41,199.

      Opinion filed June 19, 1940.
    Simon T. Sutton and McNab, Holmes & Long, all of Chicago, for appellant; Simon T. Sutton and Wallace B. Kemp, of Chicago, of counsel.
    Robertson & Spence, of Chicago, for appellee; Egbert Robertson and Henry L. McIntyre, both of Chicago, of counsel.
   Mr. Justice Burke

delivered the opinion of the court.

On January 25, 1938, plaintiff filed a statement of claim in the municipal court of Chicago and therein alleged that on July 8, 1929, and for some time prior thereto, he was employed by Roberts & Oake, Inc.; that defendant solicited him to purchase 1,085 shares, without par value, of the common stock of Roberts & Company, a corporation, at the price of $3 per share; that in consideration of such purchase the defendant then and there agreed orally with plaintiff that if at any time his employment with said Roberts & Oake, Inc. was discontinued, defendant would on demand repurchase said stock at the price which plaintiff paid defendant for it; that pursuant to the agreement, plaintiff purchased 1,085 shares of said common stock from defendant and paid the sum of $3,255; that he received certificate No. 100 dated July 8, 1929, covering the stock so purchased by him; that he is now the legal holder and owner of said certificate and the stock thereby covered; that he remained in the employ of Eoberts & Oake, Inc. continuously until September 25, 1937, when his employment was discontinued; that he thereupon demanded that defendant repurchase the stock at the price paid by him; that defendant failed and neglected so to do, and that plaintiff was entitled to recover the sum of $3,255. It its defense defendant admitted the employment of plaintiff by Eoberts & Oake, Inc., and that he remained in such employment until September 25, 1937, when his employment terminated; that plaintiff was the legal holder and owner of certificate No. 100 for 1,085 shares of stock; that plaintiff demanded that defendant repurchase his stock and that defendant refused to repurchase the stock. Defendant denies all the other allegations of the amended statement of claim. Defendant further alleged that if any agent of the defendant undertook to make such oral agreement as plaintiff alleged, such purported agreement was wholly beyond the scope of the authority of such agent, and beyond the corporate powers of the defendant, and that defendant was in no way bound thereby; that if any agent made such agreement, it was wholly without consideration. The defense further stated that if any agent of the defendant undertook to make such oral agreement, it came within the provisions of section 1 of the statute relating to frauds and perjuries (sec. 1, ch. 59, Ill. Rev. Stat. 1939 [Jones Ill. Stats. Ann. 55.01]) and was-wholly invalid; that the alleged contract was unenforcible by action because it came within the provisions of section 4 of the Uniform Sales Act (sec. 4, ch. 121½, Ill. Rev. Stat. 1939 [Jones Ill. Stats. Ann. 121.08]); that the value of the stock is $500 and upwards and that no part thereof was accepted or received by defendant, or anything given in earnest by either party to bind the contract. The case was tried before the court and a jury. At the close of all the evidence, the court, on motion of defendant, instructed the jury to find the issues for the defendant, which was done. The court entered judgment on the verdict. Plaintiff moved for a new trial, which the court overruled. This appeal followed.

Plaintiff’s theory of the case is that the contract is valid and enforcible and is based'upon a valuable consideration and was entered into by the defendant through its duly authorized agent; that defendant was bound to purchase the stock of plaintiff after September 25, 1937, when plaintiff’s employment with Roberts & Oake, Inc. terminated, and the plaintiff demanded that defendant purchase the stock; that defendant’s refusal to purchase the stock was a breach of contract for which the plaintiff is entitled to recover damages. Defendant’s theory of the case is (1) defendant did not sell any stock of Roberts & Company to the plaintiff; (2) No one made any agreement in behalf of defendant to purchase or repurchase any such stock from plaintiff ; (3) Even if E. W. Thomas had made such an agreement on behalf of the defendant he was without authority so to bind the defendant; (4) Even if E. W. Thomas had made such an agreement and had been so authorized, such agreement was without consideration; and (5) Even if E. W. Thomas had made such an agreement and had been so authorized, such agreement is unen.forcible under the statute of frauds.

The first point presented by plaintiff is that it is error for the trial court to give a peremptory instruction to find the issues for the defendant where there is any evidence in favor of the plaintiff, which, with all the inferences that a jury may justifiably draw therefrom, fairly tends to prove the cause of action set out in the statement of claim. Under this point plaintiff argues that there is some evidence which fairly tends to prove the plaintiff’s cause of action. Defendant concedes that upon a motion to direct a verdict for the defendant the court is not permitted to weigh the evidence, or to base its decision on such motion upon a consideration of the credibility of the witnesses. Defendant also calls attention to the rule that since the presumptions are in favor of the action of the trial court, the burden is upon the plaintiff to point out the evidence which might reasonably in the eye of the law constitute support for a verdict of the jury in favor of the plaintiff, if one should be rendered. Defendant cites Libby, McNeill & Libby v. Cook, 222 Ill. 206, for the proposition that where there is no affirmative defense, the rule is that a verdict for the defendant should not be directed when there is in the record evidence which fairly tends to prove all the material averments of the declaration; that a mere scintilla of evidence in favor of the plaintiff does not justify the court in refusing to direct a verdict, because that quantum of evidence, only, cannot be said to fairly tend to prove any material averment of the declaration. Defendant also calls our attention to the statement in Brandt v. Brandt, 286 Ill. App. 151, that the ultimate question to be decided upon such a motion is whether there is any evidence in the record from which a jury could, acting reasonably in the eye of the law, return a verdict for plaintiff. If there is such evidence, the motion should be denied; if not, then the motion should be granted. Plaintiff does not challenge the statement of law by defendant that it is incumbent upon him to show that there was presented in support of the claim, a promise made in behalf of the defendant, or a quantum of evidence from which the jury might reasonably in the eye of the law, have found for plaintiff. Defendant then states another principle of law governing the directing of a verdict where the defendant presents an affirmative defense. That principle is that where evidence of an affirmative defense is offered, it is proper to direct a verdict for the defendant even though all the averments of the statement of claim are proved, if the evidence of the affirmative defense is not contradicted or questioned. If the defendant introduces uncontradicted evidence of facts, consistent with every fact which the evidence of plaintiff tends to prove, but showing affirmatively a complete defense, the motion for a directed verdict made at the close of all the evidence should be allowed. (Nelson v. Stuts Chicago Factory Branch, 341 Ill. 387; Cohen v. New York Life Ins. Co., 256 Ill. App. 345; Paulsen v. Cochfield, 278 Ill. App. 596.) Defendant contends that the rule as to the directing of a verdict where the defendant produces uncontradicted evidence of an affirmative defense, is applicable to its defenses of want of authority, want of consideration, statute of frauds and to a peculiar situation which plaintiff asserts is raised by the testimony as to the alleged promise. Defendant argues that plaintiff failed, to produce the requisite quantum of evidence that a promise was made in behalf of defendant, and that the testimony of the witnesses is consistent with the fact that the promise was made in behalf of Eoberts & Oake, Inc. In granting the motion for a directed verdict the trial court decided as a matter of law that the plaintiff had failed to present a quantum of evidence sustaining his claim, or had failed to present any evidence to contradict the undisputed affirmative defense presented by defendant. It has been necessary, therefore, to carefully read the transcript of testimony in order to apply the aforesaid principles of law. In considering the testimony, we have in mind the admonition that we should not weigh the testimony. The parties are in substantial agreement as to the principles of law governing the consideration of the propriety of a directed verdict.

Early in 1929, Roberts & Cake Co., Miller & Hart and Roberts & Withington were packing house companies, in which the principal stockholders were Col. John Roberts and his brother, C. J. Roberts. That year Roberts & Cake Co. became Roberts & Cake, Inc., a Delaware corporation. With the aid of A. C. Allyn & Company, an investment banking house, a plan was devised under which the entire common stock of the operating companies was acquired by a new holding-company called Roberts & Company. The plaintiff and other employees of Roberts & Cake, Inc., had formerly held preference and common stock of the old Roberts & Company, and as a part of the corporate rearrangement this stock had been surrendered and paid for. Out of these transactions C. J. Roberts received 73,157 shares of the common stock of Roberts & Company, of which A. C. Allyn & Company agreed to purchase a substantial part less such of the stock as Roberts might dispose of to members of the organization of the operating companies. C. J. Roberts received certificate No. 16 for 68,157 shares in Roberts & Company. John Roberts received certificate No. 72 for 113,265 shares of Roberts & Company. These two certificates were surrendered for cancellation, and out of the shares represented, there were issued the following- certificates: Certificate No. 83 to A. C. Allyn & Company for 60,000 shares, certificate No. 127 to C. J. Roberts for 45,557 shares, and certificate No. 128 for 75,865 shares to John Roberts. On the same day, July 8,1929, certificate No. 83 for 60,-000 shares to A. C. Allyn & Company was surrendered for cancellation and reissue of the stock represented thereby, and out of such shares the following certificates were issued: Certificate No. 100 to J. P. Hassey, plaintiff, for 1,085 shares, and other certificates to 39 employees of Roberts & Cake, Inc., aggregating with certificate No. 100 a total of 11,000 shares, and certificate No. 126 to A. C. Allyn & Company for 49,000 shares. As a result of the meeting of the lceymen of Roberts & Cake, on or about June 10, 1929, 39 employees of Roberts & Cake undertook to purchase stock of Roberts & Company in varying amounts totaling 11,000 shares. At this time the books of Roberts & Company were kept at the office of A. C. Allyn & Company. Defendant contends that the nature of the transactions was to transfer 11,000 of the shares owned by C. J. Roberts to 39 employees of Roberts & Cake, among whom was J. P. Hassey, the plaintiff, and that the passage of said shares through the name of A. C. Allyn & Company was simply a matter of bookkeeping convenience as to the issuing and indorsing of the certificates. The meeting at which plaintiff contends the oral agreement to repurchase was made, was on June 10,1929, in the offices of Roberts & Cake, Inc. There were present C. J. Roberts, plaintiff, Howland, Costello, Long and Dunnett, all officers and directors of Roberts & Cake, Inc. Among the employees present were Mr. Hood, chief engineer, Mr. Turner, the hog buyer, Mr. Zipperer, in charge of sausage manufacturing, Mr. Kent, in charge of killing, Mr. Burgess, in charge of the sellers, and Mr. Rose the purchasing agent. A. C. Allyn, president of defendant corporation, was not present. E. W. Thomas was also present at the meeting. At that time he was a director and vice president of the defendant corporation and a vice president of Roberts & Cake, Inc., and Roberts & Company. Mr. Thomas addressed the meeting and informed them of the reorganization which had taken place in the corporate structure of Roberts & Cake, Inc. The employees were told there would be no change in the management of the company, and the organization and nature of Roberts & Company was described. There is no dispute about the fact that at the meeting of directors, officers and employees of Roberts & Cake, Inc., E. W. Thomas stated to such employees that those who purchased the stock of Roberts & Company under the opportunity then given them, would, in the event they ceased to be employees of Roberts & Cake, Inc., or died, have the stock taken off their hands, or from their estates, at the price they were paying, $3 a share, provided a public market had not been made for the stock. It is likewise undisputed that the minutes of the regular meeting of the board of directors of Roberts & Cake, Inc., held June 13,1933, show the following:

“One of our salesmen left the employ of our company and question arose as to whether we should repurchase the Roberts & Company stock from him at the price he paid for his original subscription. In accordance with agreement made at the time the stock was purchased the Board instructed the repurchase of this salesman’s stock.” It is also admitted that plaintiff, J. P. Hassey, was one of the board of directors which took this action. Mr. Thomas testified that at the meeting with the key-men the promise to repurchase was made specifically in behalf of Roberts & Cake, Inc. It is the contention of defendant that it is now incumbent upon the plaintiff to point out the evidence in the record from which the jury might reasonably in the eye of the law, be entitled to draw a legitimate inference that the promise was made in behalf of A. C. Allyn & Company and not in behalf of Roberts & Cake, Inc. In their testimony as to the conversation on which plaintiff relies, the witnesses frequently indulged in the use of pronouns, and a dispute has arisen as to whether the parties, in the use of the pronouns, were referring to a promise to repurchase in behalf of defendants, A. C. Allyn & Company, or in behalf of Roberts & Cake, Inc., the employer of plaintiff. Defendant contends that the court was fully warranted in concluding that there was no adequate quantum of evidence to support plaintiff’s claim that the promise was made on behalf of the defendant. It, therefore, becomes necessary for us to briefly summarize the testimony of the witnesses in order to determine whether or not the court usurped the province of the jury in directing a verdict in so far as the controversy as to the promise is concerned. In considering this testimony, it should be borne in mind that plaintiff is entitled to have the evidence considered in the light most favorable to him, with all reasonable inferences that may be drawn therefrom. We have no right to weigh the evidence.

Arthur C. Allyn, who was called as a witness for plaintiff under rule 195-A, section 33, of the‘municipal court, testified that he was president of the defendant corporation; that the business of defendant was buying and selling bonds and stocks and included the buying and selling of securities or stocks of corporations whenever the defendant underwrote and sold to the public; that E. W. Thomas was vice president; that Thomas was primarily assistant to witness; that “As my assistant he attended to the details of the effectuation of the plans made, generally speaking, if I were not present. We all sold securities. I was to initiate it. I very often did a great deal with setting it up in the first instance, making the plan, then I turned it over to some one to finish the execution of those plans; and that was the nature, generally, of Mr. Thomas ’ work. He was helping to originate securities. He was generally as useful as he could be throughout the organization.

“In connection with the setting up of Roberts & Company, I consulted many times with Mr. Thomas. I remember the transaction. I initiated the purchase of both Miller & Hart and Roberts & Cake from Colonel John Roberts and Mr. C. J. Roberts, who were the owners, and the details of the conclusion of the transaction, that is, the exact way which it went through and reason for the organization of various companies. I may or may not have been, depending on whether I was available at the time. I was available at the time that particular question came up. I am not always in Chicago, but Mr. Thomas was my assistant to a large extent in connection with the deal. We have never sold any of the stock of Eoberts & Company, to my knowledge. We made no public offering of it.” C. J. Roberts, called by plaintiff, testified that in 1929 he was president of Roberts & Cake; that he owned a large block of stock; that he was present at several meetings at the office of Roberts & Cake, Inc., at the stock yards in the year 1929, at which E. W. Thomas, vice president of A. C. Allyn & Company, was present; that he was present at a meeting of the directors of Roberts & Cake, Inc. in June or July, 1929, which was attended by Mr. Thomas; that Mr. Thomas said that he thought if the employees bought some of the stock it would stimulate their efforts in connection with their conduct of the business; that Mr. Thomas said “they would like to have the employees own some of the stock”; that witness said that during the World War he had “an experience of this kind and did not expect to go through it again”; that the experience arose out of the subscription of Liberty Bonds by employees of Roberts & Cake, wherein the employees failed to continue making their payments after the market price of the bonds had dropped, making it necessary for Roberts & Cake to pay for the bonds at par at a loss to them of seven or eight thousand dollars. Witness testified that “with that in mind, I am not going to force anybody to buy any of this stock”; that Thomas said that “if we got the keymen in he would be glad to talk with them in connection with the stock”; that the keymen were sent for and came in; that Thomas addressed the men; that witness failed to say anything due to the reason he had given; that Thomas told these keymen, including Mr. Hassey, that A. C. Allyn & Company would like to have them own some of this stock for the reasons given— the stock of Roberts & Company which was the holding company, and that with that in mind any stock they would subscribe to they would guaranty that if they bought it at $3 a share, that in case they bought the stock that they thought it was of good value; that the question arose as to what they would do with the stock in case they were discharged or in case they died, whether their family would get it, and Mr. Thomas said they would pay $3 a share for every share of that stock sold or bought at that time, if they wanted to resign, whether they were discharged, or if they died; that he did not address the keymen; the address was made by Mr. Thomas. On cross-examination he identified the signature of plaintiff as secretary of Roberts & Oake, Inc. on the minutes of the meeting of June 13, 1933, an excerpt from which has been set out above. David R. Howland, called by plaintiff, testified that he also was president of Roberts & Oake during 1929; that in 1929 he became acquainted with Thomas, who was then vice president of A. C. Allyn & Company; that he was present at the time of the meeting in the summer of 1929. which was attended by Mr. Thomas and by the keymen including plaintiff; that “Mr. Thomas addressed the employees and the directors, who were all employees but himself, and stated that A. C. Allyn who had gotten control of the business of Roberts & Oake, was anxious to have the keymen of the organization of Roberts & Oake stockholders in Roberts & Company, the new company who controlled Roberts & Oake, on the basis that they would be more interested in the welfare of the company. Mr. Thomas stated that the employees did not have to buy but they were anxious to see that those who were running the business have a share in the business; and offered Roberts & Company stock on the basis of $3.00 a share. After talking around on that subject, the first point that was raised and I think I was the one that raised it, if I remember, was what or how could we sell this stock once we owned it ? And Mr. Thomas said that until a public market was made for the stock the stock would be bought back at $3.00 a share, if a man severed his relations with the company for any cause or was in a position where he needed the money badly.” On cross-examination he testified that he did not know that defendant had contracted to buy some stock from C. J. Roberts at a price of $3 a share. He further testified that Thomas was vice president and a director of Roberts & Oake, Inc. at the time of the meeting. Arnold Rose, called by plaintiff, testified that in 1929 he had charge of the purchases for Roberts & Oake; that he was present at the meeting; that “We were called in and addressed by Mr. Thomas. Mr. Thomas suggested that we purchase some of the stock in the new company. . . . I raised the question at the time as to what we could do with the stock in the event that we wanted to sell it. Mr. Thomas gave us assurance at that time that if we left the employ of the company that he would pay us just exactly what we paid for it.” Plaintiff, J. P. Hassey, testified in his own behalf that in 1929 he was secretary of Roberts & Oake, the Hlinois corporation, and also the corporation of the same name organized under the laws of Delaware, which succeeded to the assets and business of the Illinois corporation; that about June 10, 1929, he was present in the directors’ room of Roberts & Oake at the Union Stock Yards; that present also were E. W. Thomas, vice president of A. C. Allyn & Company, O. J. Roberts and others; that “Mr. E. W. Thomas addressed the meeting, whom I knew to be a vice-president of A. C. Allyn & Company.

“He said, ‘You know, there has been a change in the ownership of Roberts & Oake, but I want to assure you there will not be any change in its management. For the past good many years Miller & Hart, Roberts & Oake, and Roberts & Withington have all operated at a profit. A. C. Allyn & Company have now formed a parent company known as Roberts & Company, which will control those three companies by the ownership of its stock, common stock. Roberts & Company stock is priced as all common stock is priced at $3.00 a share. A. C. Allyn & Company is desirous of all the employees of Roberts & Oake that can do so to purchase this stock of Roberts & Company. ’ He further went on to say that inasmuch as these three companies had been suecessful for a number of years in the past there wasn’t any reason to believe but what their future would be successful. And he further stated that any employee buying this stock at $3.00 a share from A. O. Allyn & Company in the event of their leaving the service of the company at any time and for any reason whatsoever, he said, we will buy it back at $3.00 a share, provided, that if in the meantime A. C. Allyn & Company establish a market for this stock, then it will be up to the individual owner to either sell that stock on the market or hold it. ’ ’ The court then received in evidence a letter dated June 29,1929, signed by Roberts & Oake, Inc., addressed to A. C. Allyn & Company, which forwarded 10 checks in the aggregate sum of $33,000, payable to A. C. Allyn & Company, to cover the subscription for 11,000 shares of Roberts & Company stock at $3 a share. Attached to the letter was also a sheet showing the subscribers. Plaintiff’s stock certificate was received in evidence. It was also stipulated that no market was ever established for the stock. There was also received in evidence a letter dated October 16, 1937, wherein plaintiff demanded that defendant carry out the oral agreement which plaintiff alleged was entered into in June, 1929, to repay plaintiff at the rate of $3 per share for the stock he purchased, in the event he left the employ of Roberts & Oake. He also tendered the shares of stock. On cross-examination he testified that the checks for $33,000 forwarded to defendant in payment for the 11,000 shares, fell into three groups. The first group consisted of individual checks, which included plaintiff’s check in the sum of $1,500. The second group consisted of employees who had a credit balance on the books of Roberts & Oake. The third group, aggregating $19,293.13, represented money which Roberts & Oake advanced to the employees to enable them to buy the stock; that the employees in effect borrowed the money from Roberts & Oake. Witness further testified that he continued to be a director of Roberts & Cake, the Delaware corporation, until September, 1937; that he became a director of Roberts & Company around 1934, and continued to be a director in that corporation until September, 1937. The court also received in evidence a letter dated May 24, 1929, from A. C. Allyn & Company, by E. W. Thomas, vice president and treasurer, addressed to Mr. C. J. Roberts of Roberts & Cake, Inc., Chicago, and accepted by Mr. C. J. Roberts on the face thereof, which letter reads:

“My dear Mr. Roberts : —

“In connection with the reorganization of Roberts & Cake, Inc., recently completed, there were delivered to you 73,157 shares of Roberts & Company (a Delaware Corporation) common stock. Roberts & Company has a capitalization of 750,000 shares of common stock authorized, of which 500,000 shares are now outstanding.

‘ ‘ Of the 73,157 shares of Roberts & Company Common stock delivered to you as above, you have agreed to hold 20,000 shares.

“We agree to buy from you and you agree to sell to us within one year from the date hereof, at $3 per share plus interest at the rate of 6% per annum to the date of payment, the remaining 53,157 shares of such Roberts & Company common stock, less such number of shares of such stock as you may dispose of within that period to members of the organization of Miller & Hart, Inc., Roberts & Cake, Inc. and Roberts & Withington, Inc. It is understood that you will not dispose of any such shares except to members of such organizations without our approval.

“We are to have the privilege of exercising our right to purchase all or any part of the stock covered by this agreement at the price specified, from time to time, within the period mentioned, upon reasonable notice to you of our intention so to do.

“Please indicate your acceptance and agreement to this understanding by signing below.” Certain parts of the bylaws of defendant corporation were received in evidence. These relate to the duties of the president and vice president. The following are excerpts from the bylaws: “President: . . . He may . without previous authority of the Board, make such contracts as the ordinary conduct of the Company’s business requires. He shall have the usual powers and duties vested in the President of a corporation. . . . He may delegate any of his powers to a Vice-President of the Company. He shall at all times be subject to the Board of Directors.

“Vice-President: Each Vice-President shall have the same powers and duties as the President, in the event of the latter’s absence or disability, and also such of said President’s powers and duties as the President may from time to time delegate to him. ’ ’ Also received in evidence was the record of the defendant corporation showing the adoption, by the board of directors at-a meeting held on April 16,1924, of the following resolution :

“Whereas, it is the unanimous opinion of the Board of Directors of A. C. Allyn & Company that it is unethical and not good business practice to buy or sell securities for guaranteed investment, we hereby instruct that the following letter be forwarded to all of the members of our organization:

“ ‘To the Members of the Organization of A. C. Allyn & Company:

“ ‘As we firmly believe trading in securities for guaranteed investment is unethical and detrimental to the best interests of the bond business, please be advised that the Board of Directors have passed a resolution today forbidding any of the members of our organization to purchase or sell securities that involve guaranteed investment.

“ ‘We also request that all of our officers and employees desist from writing any letters either for the firm or for their personal account, offering to sell or purchase from anyone securities for guaranteed investment. We, as a firm, do not want to participate in any transaction of this kind in any way whatsoever.

‘ ‘ This is the second time we have cautioned the members of our organization about this, and as it is a vital matter, no violation will be tolerated, and we trust that we shall have your full co-operation. ’ ” E. W. Thomas also testified in behalf of the defendant that in the investment securities business in Chicago, “guaranteed investment” meant the sale of securities to be repurchased at some future date at the price at which they were sold. He further testified that A. C. Allyn, president of defendant corporation, did not at any time tell witness that he could or might tell any one to whom the stock of Roberts & Company was being sold that A. C. Allyn & Company would repurchase such stock at the request of the purchasers. He further testified that there was no promise on behalf of defendant to repurchase the stock, but that he did make a statement that under certain conditions heretofore mentioned, the stock would be repurchased by Roberts & Cake. On cross-examination he testified that he was never actively in the meat packing business and that he became an officer in the packing companies because of the financing that was being arranged by A. C. Allyn & Company; also, that he did not show the keymen the letter of May 24,1929. He further stated that an essential part of the" investment business is the borrowing of substantially large sums from banks in order to swing deals; that when loans are made the banks require financial statements showing assets and liabilities; that when an investment house permits salesmen to make promises that the house will repurchase stock, then the house would have an indefinite contingent liability which would make it difficult to borrow because of the difficulty of making a financial statement. Witness further testified that at the time A. C. Allyn & Company bought the stock of Roberts & Company “we expected to keep the bigger part of it. That is not the reason why we didn’t make the public markets. The first reason that we did not attempt to make a public market was that before we could get down to it, October, 1929 happened, and' it was impossible to market any stock”; that the second reason was that after the collapse of the market neither Miller & Hart nor Roberts & Cake had earnings to justify the marketing of the Roberts & Company stock. Plaintiff testified in rebuttal that prior to the directors’ meeting of June, 1933, he called up A. C. Allyn & Company on the telephone with reference to the transaction for the purchase of stock; that he talked with Perry G-. Anderson, whose voice he recognized; that the talk was around the early part of June, 1933; that witness told Anderson that ‘ ‘ one of our salesmen had left the employ of the company, and in accordance with the agreement under which he had purchased Roberts & Company stock, he wanted it bought back. Mr. Anderson agreed that it should be done. I said, ‘Perry, it is all right to buy it back, but remember that A. C. Allyn & Company got the money for the stock, and they are the ones who should buy it back.’ He said, ‘Oh, Joe, it is only a small matter.’ He said, ‘Why not take it back and keep it in your own treasury?’ and I said, ‘I can’t do that. I have not got the official say on that. I would have to take it up with some of the powers to be.’ I 'said, ‘Is that your official decision that we should carry that in our own treasury?’ and he said, ‘Tes.’ ” The court on motion of plaintiff admitted into evidence a resolution adopted at the meeting of the board of directors of the defendant corporation on March 23, 1929, reading as follows:

“Be it resolved by the board of directors of A. C. Allyn and Company that the president or any vice-president or treasurer, or any assistant treasurer, or A. H. Bast, cashier, be and each of them hereby is authorized in the name and on behalf of this corporation, to sell, assign, or transfer any or all stock or bonds or other securities that may now or hereafter be registered in the name of this corporation.”

Defendant calls attention to the fact that there is no dispute that on the day of the meeting E. W. Thomas was vice president of Roberts & Cake, as well as of A. C. Allyn & Company, and that a promise orally made by him might have been made as well in behalf of Roberts & Cake, Inc. as of the defendant. As plaintiff points out, although Thomas was an officer in Roberts & Cake, Inc., it was only “because of this Allyn deal.” He was a director, a vice president and a treasurer of A. C. Allyn & Company. That company was the initiator of the purchase of both Miller & Hart and Roberts & Cake, Inc. C. J. Roberts testified that Mr. Thomas told the keymen, including plaintiff, that A. C. Allyn & Company would like to have them own some of the stock of Roberts & Company, and with that in mind, any stock they would subscribe to “they would guarantee that if they bought it at $3.00 a share, that in case they bought the stock they thought it was good value. . . . and Mr. Thomas said that they would pay $3.00 a share for every share of that stock that the employees sold or bought at that time, if they wanted to resign, whether they were discharged, or if they died.” We are convinced that the evidence on the proposition as to whether the oral contract to repurchase was made in behalf of the defendant, A. C. Allyn & Company, or Roberts & Cake, Inc., presented a clear question of fact for the jury. If the jury believed the testimony favorable to the contention of plaintiff, it would be reasonable to infer from the conversations and circumstances that Mr. Thomas was speaking on behalf of A. C. Allyn & Company in announcing the repurchase arrangement.

The action of the board of directors of Roberts & Cake on June 13,1933, participated in by plaintiff as a director, authorizing the purchase of the Roberts & Company stock owned by a salesman who left the employ of that corporation, was properly admitted as an admission against interest. Plaintiff took the stand in rebuttal and offered an explanation of the action taken at the meeting of June 13, 1933. He told about a conversation with Perry Gr. Anderson, of A. C. Allyn & Co., in which he (witness) said, “It is all right to buy it back but remember that A. C. Allyn & Company got the money for that stock and they are the ones that should buy it back.” Plaintiff points out that there is no showing that the salesman who asked that his stock be repurchased was present at the meeting of the keymen, or that he bought his stock as a result of that meeting. In any event, the action of the board of directors taken on June 13, 1933, could only be considered in weighing the evidence.

Defendant also asserts that Mr. Thomas was without authority to make the promise in behalf of A. C. Allyn & Company, and contends that, in fact, the making of such contracts was specifically prohibited as shown by the resolution of the board of directors of defendant adopted April 16, 1924, at which meeting Mr. Thomas was present. Defendant also argues that no such authority was implied from Mr. Thomas’ position as vice-president, nor did such office create such a presumption of authority, but if there were such presumption it would not constitute any quantum of evidence, and the affirmative evidence proved that such authority did not exist. Defendant also maintains that the alleged agreement was never ratified. We are of the opinion that the bylaws of defendant gave the president the power to make contracts in the ordinary course of its business without previous authority of the board of directors, and to delegate any of his powers to the vice president. The bylaws gave the vice president the same powers and duties as the president, in the event of the latter’s absence or disability, and also such of the president’s powers and duties as the president might from time to time delegate to him. The buying and selling of securities and the underwriting of issues of securities, were all part of the business of defendant. It is clear that Mr. Thomas, as vice president, was acting for the president in the transaction involving the corporations we are discussing. The resolution of March 23,1929, gave the vice president the authority to sell any securities or stock owned by defendant. This made Thomas a general agent to sell. In Peoria Life Ins. Co. v. International Life & Annuity Co., 246 Ill. App. 38, it was held that “Where a corporation through its president sold notes and received the money paid therefor, it is in no position to question the authority of its president to sell the notes or the validity of his agreement to repurchase them, where the transaction appears to have been in furtherance of its corporate interests. Flodin v. W. H. Lutes Co., 191 Ill. App. 195. ’ ’ Defendant places great reliance on the resolution of April 16, 1924, to sustain its position that there is no quantum of evidence establishing the authority of Thomas to make the agreement in behalf of defendant. There is a dispute between the parties, as to the meaning of the term “guaranteed investment.” It is our view that the so-called “guaranteed investment” resolution was in the nature of special instructions to the officers and employees of defendant as to the manner in which they should discharge their duties. In Green v. Ashland Sixty-third State Bank, 346 Ill. 174, at p. 180, our Supreme Court said:

“The president of a corporation, by virtue of his office, is the business head of the corporation, and as a general rule any contract pertaining to corporate affairs within its general powers will, when executed by the president and in the absence of proof to the contrary, be presumed to have been executed by authority of the corporation as one of the powers incident to his office. (Bloom v. Vehon Co., 341 Ill. 200.) The public is not bound to inquire into the special instructions which the officers or servants of a bank may have received as to the manner in which they shall discharge their duties. This is a matter solely between the employer and the employed. The general rule is that the by-laws of a corporation are binding upon none but its members and officers. (Ward v. Johnson, 95 Ill. 215; Munn v. Burch, 25 id. 35.)” There is also evidence that Mr. Thomas had apparent authority to make the alleged contract in behalf of defendant. Hence, we are of the opinion that under the record before us, the dispute as to whether Thomas had authority to make the contract involved the decision of a question of fact and not of law, and should have been left to the jury for determination.

The next point argued by defendant is that in any event there was no consideration for the alleged contract. Defendant states that the plaintiff did not purchase the stock from defendant; that plaintiff purchased the stock from G. J. Roberts, and that, therefore, there was no legal benefit received by defendant; that the stock simply passed through the name of defendant as the easiest way for G. J. Roberts to handle the mechanics of transferring some 11,000 shares of stock from his ownership to his employees, in varying amounts; that the consideration for the stock was paid in at $3 per share and passed on to Roberts at $3 per share. We agree with the contention of plaintiff that if the purchase of the stock was from C. J. Roberts, and plaintiff purchased it at the request of defendant, who was acting as a broker or underwriter, such purchase was a legal benefit to defendant, and was sufficient consideration to support the promise of defendant to repurchase. “Wherever the pleas raise the question of no consideration moving from the appellee for the undertaking of appellant, it is enough to say that privity or consideration between a promisor and a third person, who is a beneficiary, need not exist to support the promise, provided there is a valuable consideration for the promise as between the principal parties to the undertaking. (Dean v. Walker, 107 Ill. 540; Bay v. Williams, 112 id. 91.)” Citing Cobb v. Heron, 180 Ill. 49.

Finally, defendant argues that the oral promise, if made, would be unenf orcible because of section 4 of the statute of frauds (sec. 4, ch. 121½, Ill. Rev. Stat. 1939 [Jones Ill. Stats. Ann. 121.08]). It is, of course, conceded that the alleged oral agreement was for the resale by plaintiff of shares of corporate stock of the value of $500 and upwards. Plaintiff, however, replies by contending that there was a part performance sufficient to take the case out of the statute. Defendant insists, however, that there was no part performance since there was no contract for the sale of the stock from defendant to plaintiff. Defendant states that where the alleged promisor is not selling stock which belongs to it, but to another, it is uniformly held that there are two contracts, and not one, and that the performance of the first contract is not a part performance of the second, and that, therefore, the statute of frauds is applicable to defeat any action upon the oral promise of alleged repurchase. In support of this proposition defendant cites Thomas v. Peoples’ Gas & Electric Co., 220 Iowa 850, 263 N. W. 499; Gainsburg v. Bachrack, 241 App. Div. 28, 270 N. Y. S. 727; Wood v. Fairbanks, 244 Mass. 10, 137 N. E. 924; Korrer v. Madden, (152 Wis. 646) 140 N. W. 325; Becker v. Kreul, 173 Wis. 273, 181 N. W. 211. Defendant asserts that no benefit accrued to Allyn & Company by reason of the transaction since the effect of the sales to employees was simply to substitute them instead of A. C. Allyn & Company, as purchaser, from C. J. Roberts, to the extent of the 11,000 shares which the employees took. Plaintiff does not challenge the proposition of law advanced by defendant. Plaintiff asserts however, that the evidence shows that plaintiff paid the purchase price for the stock to A. C. Allyn & Company; that A. C. Allyn & Company accepted the purchase price and that certificate Ño. 100 for 1,085 shares which was issued to plaintiff, originated from certificate No. 83, which was issued to A. C. Allyn & Company for 60,000 shares, that the stock was purchased from A. C. Allyn & Company, and that the promise to repurchase was made simultaneously with the sale. We are of the opinion that •there is evidence in the record from which the jury could find that the sale and the repurchase agreement were made by A. C. Allyn & Company, and that in fact the sale and repurchase agreement was one transaction. It will be recalled that the employees inquired as to what would happen in case of death, or in case they ceased to be employees. A reasonable inference is that the contract to purchase the stock would not have been entered into by the employees without the repurchase promise being made an integral part of the deal. We are, therefore, of the opinion that the court did not have a right to decide, as a matter of law, that the action was barred by section 4 of the statute of frauds.

For the reasons stated, the judgment of the municipal .court of Chicago is reversed and the cause remanded for a new trial.

Reversed and remanded.

Denis E. Sullivan, P. J., and Hebel, J., concur.