author: Mr. Justice Ryner

text:
    American Dental Company et al., Plaintiffs in Error, v. Central Dental Laboratory Company et al., Defendants in Error.
    Gen. No. 33,267.
    Opinion filed March 5, 1930.
    Otto A. Jaburek and James S. Wight, for plaintiffs in error.

      Wm. A. Cunnea and Pines, Morse & Stein, for certain defendants in error; Alvin E. Stein and John M. Humphrey, of counsel.
   Mr. Justice Ryner

delivered the opinion of the court.

On April 19, 1927, certain corporations and individuals, 28 in number, filed their bill of complaint in the circuit court of Cook county, against five parties, named as defendants. The bill alleged that all of the parties to the proceeding had, for several years, been engaged in the business of owning and operating dental laboratories in the City of Chicago for the manufacture and sale of plates, bridges, crowns and other dental work and supplies, for the preparation of which each had and maintained special materials, facilities and equipment.

It is further alleged that the sole customers of the laboratories are dentists practicing in Chicago and neighboring communities; that the dental work furnished to the customers is prepared upon special directions, specifications, molds and measurements, to be used for the individual patrons of the dentists; that, by virtue of the nature of the work, regularity and promptness in the doing of it is essential, and that in the doing of the work persons of special skill and training are employed, who receive uniformly high wages and secure regular and permanent employment.

The bill then charges that the workmen employed in the laboratories had never belonged to any labor union; that no labor union pertaining to such workmen ever existed in Chicago until.a short time prior to the filing of the bill, because the workmen had not felt the need of any such organization and had never had any serious disputes with their employees about wages and conditions of employment; but that “within the preceding year certain persons who were not employed in the work of said dental laboratories and had never had any connection therewith, but who were engaged in the business of organizing and exploiting labor unions, attempted to organize the workmen of all dental laboratories in Chicago into a labor union, and having formed a union composed of a few of said workmen, attempted to compel all other workmen in said laboratories to join the same, using threats and intimidation, as well as persuasion to effect such object and were threatening to picket the laboratories whose workmen refused to join such union, and to attempt to establish a boycott upon the business of such laboratories.”

The bill next sets out in haec verba a written agreement between the parties to the suit, dated February 28, 1927, which, after certain recitals to the effect that the parties are competitors, that they are familiar with the fact that labor unions have, at various times, made unjustifiable demands upon employers, and that they desire to enter into an agreement for their mutual protection, reads as follows:

“Now, therefore, the parties hereto, in consideration of the premises and of the recitals hereinabove set forth and of the mutual covenants hereinafter contained, agree together as follows:

“1. That in all controversies with labor unions and in all controversies with employees, which are of a general nature, and in all cases of controversies with a combination of labor unions and employers, the action taken by the party or parties hereto involved and affected by such controversy or controversies shall be such as may be determined by a two-thirds vote of all of the parties hereto; provided, however, that the action to be taken and the means and method employed shall be lawful.

“2. Such vote shall be taken at a regularly called meeting of the parties hereto. Such meeting shall be called by F. S. B. Cheesman or his successor, and the notice of suck meeting shall contain the time, place and object thereof.

“3. Since the damages for violation of this agreement are uncertain and incapable of exact ascertainment in advance of the breach thereof and even after breach and are not susceptible of definite and positive .proof, it is agreed by all of the parties hereto that any party violating said agreement shall pay a sum equal to two hundred dollars for each technical employee of such party employed by such party at the time of the breach of said agreement as liquidated damages to the remaining parties hereto who have not violated this agreement; provided, however, that such sum so to be paid shall not be less than one thousand dollars nor more than ten thousand dollars; and provided further, that the number of employees upon which said liquidated damages shall be computed shall be the largest number of employees employed by said party so violating said agreement during the period of thirty days immediately preceding such breach.

“4. Since the liquidated damages herein specified may not constitute adequate damages for the breach of this agreement and the injury to the remaining parties to this agreement by reason of such breach being uncertain, irreparable and continuing, it is agreed that in addition thereto an injunction may issue, without notice, out of any court restraining any actual or threatened breach of this agreement.

“5. This agreement shall continue in full force and effect as to each and every party hereto until can-celled by any party hereto by a six months ’ notice in writing to all of the other parties hereto. Cancellation of this agreement by any party hereto shall cancel the same only as to such party and this agreement will remain in full force and effect as to all of the remaining parties hereto. A breach of this agreement by any party hereto will not release the remaining parties as against each other, hut if this agreement shall he breached by forty per cent or more of the parties hereto, any of the remaining parties hereto may cancel the agreement upon ten days’ notice in writing to the other remaining parties hereto.

“6. It is further agreed that seventy-five per cent of the parties hereto may at any time by a vote duly taken, cancel this agreement and render the same null and void.”

It is further alleged “that at a regularly called meeting of the parties to said contract held the 1st day of April, A. D. 1927, due notice thereof having been given, by a more than two-thirds majority vote, the following resolution was adopted, all of the parties to said contract having due notice thereof:

“Resolved, That in accordance with the provisions of the Employer Contract entered into by us on February 28, 1927, we will conduct and maintain our respective establishments on the nonunion.basis and as nonunion, and

“Be It Further Resolved : That we as signers of the said contract will each day hereafter, and until such time as may be otherwise determined, accept from and perform work for such struck houses, and perform said work with reasonable dispatch, in order to assist such struck houses and permit them to maintain their service during the period of the existing strike.”

It is then charged that the defendant Central Dental Laboratory Company violated the agreement and resolution by operating its laboratory upon a union basis and procuring its employees from the union; that George E. Dorsch, Master Dental Company and Standard Dental Laboratory, Inc., began operating upon a union basis, or announced their intention so to do, and that Leonard Galhouse, although complying with the terms of the contract, refused to join in the suit of the complainants.

The concluding allegations of the bill are: “that the aforesaid breaches of said contract by said defendants has greatly injured your orators in their dealings with their employees and in the conduct of their business, and if continued, will furnish a means whereby the said union, organized as aforesaid, may bring pressure upon the employees of your orators to compel them to join said union and stir up disputes between your orators and their employees, that said’conduct of said defends ants is a continuing injury to your orators in the conduct of their business by obstructing their efforts towards stabilizing their relations with their employees.”

The prayer for relief is that the defendants be “enjoiried and restrained for a period of six months from conducting and maintaining their respective establishments on a union basis until the parties to said contract shall by vote determine otherwise,” and that a decree be entered against all of the defendants except Leonard Galhouse, for the damages sustained by the complainants.

Shortly after the bill was filed the Master Dental Company- became a party complainant and its name was stricken from the record as a defendant.

The chancellor sustained the demurrers of the defendants to the bill, and, the complainants electing to abide by their pleading, the bill was dismissed for want of equity. The complainants have perfected this appeal.

The complainants rely upon two points in support of their contention that the decree of the trial court should be reversed. They say that “a contract by a group of employers to employ only those not members of a. labor union is valid and enforceable” and that “a negative covenant in a contract may be enforced by injunction even though specific performance of the contract as a whole cannot be decreed.”

The principal contentions of the defendants are that the contract and resolution are so uncertain in their terms as not to be enforceable; that they are in restraint of trade and, therefore, contrary to public policy; that they are not enforceable by injunction, and that this writ of error presents only a moot question.

The agreement is sufficiently definite in its terms to express the intention of the contracting parties that a two-thirds vote of the members should control the policy of all of the parties in dealing with labor organizations. The resolution expressed a policy of operating their establishments so as to exclude union employees. It does not appear from the allegations of the bill of complaint that the parties to the contract enjoy a monopoly in the operation of dental laboratories in the City of Chicago, or that either the contract or the resolution contravenes any principle of public policy.

In the case of Hitchman Coal & Coke Co. v. Mitchell, 245 U. S. 229, the Supreme Court of the United States said:

“That the plaintiff was acting within its lawful rights in employing its men only upon terms of continuing nonmembership in the United Mine Workers of America is not open to question. Plaintiff’s repeated costly experiences of strikes and other interferences while attempting to ‘run union’ were a sufficient explanation of its resolve to run ‘nonunion,’ if any were needed. But neither explanation nor justification is needed. Whatever may be the advantages of ‘collective bargaining,’ it is not bargaining at all, in any just sense, unless it is voluntary on both sides. The same liberty which enables men to form unions, and through the union to enter into agreements with employers willing to agree, entitles other men to remain independent of the union and other employers to agree with them to employ no man who owes any allegiance or obligation to the union. In the latter case, as in the former, the parties are entitled to be protected by the law in the enjoyment of the benefits of any lawful agreement they may make. This court repeatedly has held that the employer is as free to make nonmembership in a union a condition of employment, as the working man is free to join the union, and that this is a part of the constitutional rights of personal liberty and private property, not to be taken away even by legislation, unless through some proper exercise of the paramount police power. Adair v. United States, 208 U. S. 161, 174; Coppage v. Kansas, 236 U. S. 1, 14. In the present case, needless to say, there is no act of legislation to which defendants may resort for justification.”

In the case of Coppage v. Kansas, 236 U. S. 1, the same court said:,

“It is said in the opinion of the state court that membership in a labor organization does not necessarily affect a man’s duty to his employer; that the employer has no right, by virtue of the relation, ‘to dominate the life nor to interfere with the liberty of the employee in matters 'that do not lessen or deteriorate the service’; and that ‘the statute implies that labor unions are lawful and not inimical, to the rights of employers. ’ Tjie same view is presented in the brief of counsel for the state, where it is said that membership in a labor organization is the ‘personal and private affair ’ of the employee. To this line of argument it is sufficient to say that it cannot be judically declared' that membership in such an organization has no relation to a member’s duty to his employer; and therefore, if freedom of contract is to be preserved, the employer must be left at liberty to decide for himself whether such membership by his employee is consistent with the satisfactory performance of the duties of the employment,” and announced the further principle that: “Every citizen is protected in his right to work where and for whom he will. He may select not only his employer but also his associates. He is at liberty to refuse to continue to serve one who has in his employ a person, or an association of persons, objectionable to him. In this respect the rights of the employer and employee are equal.”

In the same case Mr. Justice Day, with whom Mr. Justice Hughes concurred, in a dissenting opinion said:

“I entirely agree that there should be the same rule for employers and employed, and the same liberty of action for each. ’ ’

It requires the citation of no authorities to support the proposition that, if one employer may lawfully refuse to employ members of a union, a number of employers may enter into a valid' agreement to pursue a concerted policy not to hire such employees, provided lawful means are adopted to effectuate the purpose. The principle applicable was aptly stated in Gasaway v. Borderland Coal Corp., 278 Fed. 56, as follows:

“Unions of owners of capital may bargain collectively, through their officers, with laborers either individually or collectively. Unions of laborers may bargain collectively, through their officers, with employers either individually or collectively. Employers may bargain for a closed nonunion shop. Laborers may bargain for a closed union shop. Both are entitled to free and equal access to the pool of unemployed labor, for the purpose of securing recruits by peaceable appeals to reason. Employers may persuade a union man, provided they do not violate- his right of privacy nor invade the rights of another, to become nonunion. Union laborers may under the same conditions persuade a nonunion man to become union. ’ ’

There remains for our consideration the question whether the bill of complaint makes out a case for injunctive relief. It is evident, from its recitals and terms, that the agreement in question, was entered into in anticipation of an attempt to organize the employees of the complainants into a union. But it contains no reference to any pending difficulties with employees or any organization of employees. The only showing-made in the bill, tending to establish injury or threatened injury of such a nature as .to warrant the issuance of the writ of injunction, is the charge that certain persons, not employed in the work done by dental laboratories, but engaged in organizing and exploiting labor unions, had succeeded in forming a union composed of a few workmen employed in dental laboratories, were attempting- to compel other workmen to join the union and, in order to accomplish their purpose, were using- threats and intimidation, and threatening to picket and boycott the places of business of the complainants whose workmen refused to join the union.

There is no charge in the bill that the defendants were conspiring- with or in any way aiding the parties charged with attempting to form the union and to do the other acts complained of. They are’charged with employing or threatening- to employ union labor. It, therefore, is apparent that the sole purpose of the bill is to procure an injunction, restraining the defendants from breaching their contract.

In the case of Associated Hat Manufacturers v. Baird-Unteidt Co., 88 Conn. 332, the Supreme Court of Connecticut had before it the by-laws of an association of hat manufacturers, which contained provisions almost identical with those embodied in the contract in the instant case. In particular, the by-laws provided for the payment, by any member of the association, of the sum of $5,000, not as a penalty but as damages for the failure to comply with the decisions, orders, prohibitions and regulations of the association. A member violated the terms of a resolution of the association with reference to the employment of union labor. The court held, in a suit at law, that the provision for liquidated damages constituted a valid and enforceable agreement and directed the entry of a judgment for the amount specified in the by-laws. The case is not controlling as to whether injunctive relief may not also be granted, but does establish the principle that there is a remedy cognizable at law.

Counsel for the complainants concede that the provision for the issuance of the writ of injunction as an additional remedy for a breach of the contract, does not make it the duty of a court of chancery to grant the additional relief, unless it appears equitable so to do.

In the case of Bartholomae & Roesing Brewing & Malting Co. v. Modzelewski, 269 Ill. 539, the Supreme Court of this State had before it the question of enforcing a contract in which a saloonkeeper agreed, for a fixed period of time, to buy all of her draught beer from a certain brewery. This was prior to the eighteenth amendment to the Constitution of the United States. The contract provided for liquidated damages of $50 per month for a violation of its terms. One of the questions before the court was whether the brewery could enjoin the breaking of the contract by the saloon-keeper. The court held that there was an adequate remedy at law, saying:

“This brings us to the question, has appellant an adequate remedy at law? By the eighth paragraph of the contract it is specifically provided that if appellees shall at any time fail to keep and live up to the covenants and agreements of their contract, and shall make default in part of the contract and fail to purchase all of the draught beer of the party of the first part as therein provided for, then and in that event they shall pay to the party of the first part, as liquidated damages, the sum of $50 per month for each and every month and fraction of a month covering the unexpired period of the contract from the date of such default to and including April 30, 1917. It will thus be seen that the parties themselves have by the express terms of their contract made provision for its breach and for the amount of damages that shall be paid in case of such breach, by way of liquidated damages, unless the same is held to be a penalty. That the object and purpose of the contract on the part of appellant were to secure to it the profits from the sale of its beer on the premises during the period of time covered by the contract is very clear from a consideration of the whole instrument. These profits, from their very nature, were of an uncertain character and difficult to estimate or ascertain with any degree of certainty. No one could estimate the amount of draught beer of the different kinds appellees would use per month, and each month, during the life of the contract. This must have been fully known to both the contracting parties, and they may well be presumed to have taken all of these matters into consideration in making the contract and fixing the amount of damages in case the contract was broken. Both parties were undoubtedly familiar with the business and deemed themselves better able to estimate and compute the amount of damages from that source than anyone else, and believed that by this provision in the contract they had done so. It does not appear to us that the amount so estimated and fixed by them is either unreasonable or disproportionate to the damages which might ensue from a breach of the contract. Under such circumstances the stipulated sum will not be held to be a penalty, where, from a consideration of the whole instrument, its object and purpose and the circumstances surrounding the parties at the time of its execution, it is clear the parties intended it as the measure of compensation in case of a breach of the contract.”

The court further said:

“If an injunction were to be issued, under the facts admitted in this case, to prevent a breach of this agreement, we fail to see how an injunction could be refused in any case to prevent the breach of all similar contracts where a business man agreed to sell in his place of business the products of a certain dealer and to refuse to sell any others. This would, in our judgment, be opposed to both reason and authority.”

We are of the opinion that the principle announced in these cases is applicable to the instant case. The defendants were charged with no wrongful act except breaching their contract to abide by a decision of two-thirds of the parties to it as to the policy to be pursued in dealing with employees and labor organizations. The chancellor did not err in sustaining the demurrer to the bill.

The decree of the circuit court of Cook county is, accordingly, affirmed.

Decree affirmed.

Wilson, P. J., and Holdom, J., concur.


source: Caselaw Access Project

license: Public Domain

text:
    Union Bank of Chicago, Appellee, v. Leo F. Wormser, Trustee et al., Appellees. Appeal of Ruth S. Van Ness, Appellant.
    Gen. No. 33,561.

      Opinion filed March 5, 1930.
    Rehearing denied March 31, 1930.
    Elmer M. Leesman and John E. Owens, for appellant.
    Lessing Rosenthal, F. Howard Eldridge and Willard L. King, for appellee Leo. F. Wormser; Isaac S. Rothschild, for certain other appellees.
   Mr. Justice Ryner

delivered the opinion of the court.

The principal issue presented by this appeal is whether the defendant, Ruth S. Van Ness, formerly Ruth S. Mayer, by the signing of a certain letter, ' created a valid irrevocable trust. The letter reads as follows:

“Chicago, June 8, 1923.
Mr. Leo F. Wormser,
105 W. Monroe Street,
Chicago.
Dear Leo:
Ton have in your firm’s trust account $1,747.59 belonging to me and I have just endorsed check of The Mutual Benefit Life Insurance Company for $22,676.64, to be deposited in the same account, making a total of $24,424.23.
Of this sum, I desire to have you invest $22,000 and to retain the securities in trust, the entire income, during my lifetime, to be paid to me, and upon my death, when the youngest child of mine me surviving attains twenty-one years of age, the entire trust fund shall be divided equally between the then living children and the issue of any then deceased child of mine, that is to say, such issue shall take the share which my deceased child (the parent of such issue) would have taken if living.
Whatever formal instrument may be needed to effect this trust can be drawn when you return from Washington.
The balance of $2,424.23 may temporarily remain in your firm’s trust account, with the privilege on your part to pay out such sums as may be owing, for fees or disbursements, to Edgar M. Johnson or your firm in connection with Millard’s estate or the insurance moneys, and the privilege on my part to withdraw the entire balance at any time or from time to time, as I may see fit.
Very truly yours,
Ruth S. Mayer.”

Ruth S. Van Ness is a daughter of Charles Shaffner, of Chicago. She obtained a decree of divorce from her husband, E. Millard Mayer, of Cincinnati, Ohio, on February 16, 1923, and was awarded the custody of their- three minor children. Subsequent to the signing of the letter of June 8, 1923, she became the wife of Louis H. Van Ness. Mayer died suddenly on March 10, 1923. He left certain policies of insurance upon his life which designated Mrs. Van Ness as the beneficiary, under the name of Ruth S. Mayer, wife of the assured.

Leo F. Wormser is a member of the law firm of Rosenthal, Hamill and Wormser. He represented Mrs. Van Ness in her divorce proceedings. He had also acted as the attorney for her father for a number of years.

The funds mentioned in the letter of June 8, 1923, constituted the principal portion of the proceeds of the life insurance policies. Mayer left nothing else to provide for the support of his children and divorced wife. Mrs. Van Ness testified that, at the time of the death of her husband, she had no money or assets of any kind but was dependent upon an allowance given her by her father.

Correspondence passing between the attorney for Mayer’s father and Wormser discloses that a question arose about the rights of the creditors of Mayer, in a bankruptcy proceeding in Ohio, to have their claims paid out of the proceeds of the insurance policies, and that Mayer’s father made what he termed an equitable claim that he was entitled to be reimbursed for approximately $3,700, which he had advanced on account of premiums on the insurance policies.

The matter of the claims of creditors was finally adjusted and Mayer relinquished any claims he had, upon the understanding expressed in the letter of his attorney to Wormser, dated April 5, 1923, which reads as follows:

“I have heard nothing from you regarding Mayer’s suggestion that anything which may be collected from the insurance companies or received from the estate, be placed in trust, Ruth to have the income for life and the principal to go to her children after her death.”

On June 5,1923, Wormser replied, by letter, in which he stated that Mrs. Van Ness was coming to his office the following day and that he was going to suggest to her the wisdom of placing the proceeds of the insurance policies in trust for the benefit of her children.

In the interim between the dates of the two letters, Wormser, according to his testimony, had several conferences with Mrs. Van Ness with reference to the creation of a trust. He said that at first she displayed resentment of any suggestion coming from Mayer but that he advised her that .the real question was the merit of the proposal and not its source.

Wormser also testified that on June 8, 1923, Mrs. Van Ness, then Mrs. Mayer, came to his office and indorsed a check from the Mutual Benefit Life Insurance Company for the sum of $22,676.64; that he read to her a copy of his letter to the attorney for Mayer, dated June 5, 1923, and discussed with her the proposed arrangement; that he advised her that her father had said that during the time she continued to live with him or her brother, in Chicago, he would provide for the maintenance of herself and children and that he favored the suggestion made by Mayer.

He further testified that, on the same occasion, he said that her divorced husband had been an extravagant and reckless man with respect to financial matters and had left nothing for his children; that he thought it to be for the best interest of herself and children to put the money beyond her own reach and to put it where she would get the income, so that the corpus would be conserved during .her life and be available for the children when they attained majority after her death. He also said that he advised her that she had better give the matter further consideration, but that she replied that they had been discussing the subject for two months, and that she had heard all she wanted to hear about the “old money” and was ready to act. He stated further that he showed her a copy of her divorced husband’s will, which showed that he intended to create a trust for his children; that he told her that she was without experience in handling money and that she should not leave herself in a position where she would be tempted to use any of the principal of the funds.

It is .undisputed that the instrument in question was prepared by Wormser and read and signed by Mrs. Van Ness on the date it bears. The entire transaction took place in his office.

It appears from the testimony of Wormser that from June 8, 1923 to June 10, 1924, she received the income from the alleged trust fund without raising any question as to her right to revoke the agreement she made; that on the latter date she requested that sufficient of the securities in the fund be sold so that she could invest $5,000 in a farm and $15,000 in a business conducted by the Federal Gauge Company. Louis H. Van Ness was president of that company. • Whether he was then or subsequently married to Mrs. Van Ness does not appear of record. Wormser declined to comply with her request,' giving as a reason therefor that he did not consider either, proposed investment a sound one.

Under date of June 11,1924, Mrs. Van Ness wrote a letter to Wormser, the tenor of which was that “In creating the trust fund for the children” she was in no way under the impression that the money was passing completely beyond her control, or that the document in question, was irrevocable, or that.the investments could not be changed if she so desired. The letter concluded with the following:

“But I should never have dreamed of tying up the money so as to make it impossible for me to reinvest it. My only idea in creating the trust was to leave this particular form of property to my children at my death, as it came from their father, instead of leaving it in my own name and making a will, which is what I should have done apparently. Unfortunately I was ignorant of the technicalities of trust funds and did not understand it to be as binding then as you described it yesterday.
“Will you please have copies mailed to me at once of the trust and the list of securities, both of which I have mislaid. I am very anxious to obtain a clearer understanding of this matter immediately, and would, therefore appreciate an immediate answer.
Very sincerely,
Ruth Mayer.”

On February 27, 1925, Wormser wrote to Mrs. Van Ness, suggesting that, since the duration of the trust would probably exceed his own life, the trust be transferred to a trust company. Six months later Mrs. Van Ness designated the Union Bank of Chicago as the trust company of her husband’s choice. Wormser then prepared a trust agreement to be executed by Mrs. Van Ness and the bank. The document was approved by Ellis, who was then her attorney. The agreement, together with the securities in question, and the resignation of Wormser, as trustee, were deposited with the bank. Mrs. Van Ness refused to execute the agreement and, through another attorney, demanded possession of the securities as her own personal property. Wormser was asked to consent to this but refused so to do.

On July 2, 1926, the Union Bank of Chicago filed its bill of interpleader, making Mrs. Van Ness and Wormser parties defendant. A hearing was had, resulting in a decree of the court adjudicating that the document executed by Mrs. Van Ness on June 8,1923, constituted a valid and irrevocable trust.

Mrs. Van Ness testified that she told Wormser that she wished the money invested so that it would certainly go to her children in case she should die suddenly ; that when Wormser refused to make a change in the investment, requested by her, she expressed surprise and told him that she did not understand that she could not make investments as she chose, or that the money had gone beyond her “personal jurisdiction”.

She further testified that she read the letter of June 8, 1923 before she signed it, and that the language contained in it meant to her “exactly what the words implied.” When the chancellor asked her what meaning she gave to the words in the letter, “Whatever formal instrument may be needed to effect this trust can be drawn when you return from Washington,” she replied that

“It meant something that merely embodied—well, or any other sort of thing that had a legal stamp on it, so that should I be out of the way in a hurry someone could not say it was not legal and valid.”

In rebuttal she testified that she was in error when she said that she signed the letter of June 8, 1923, at her home, and that her memory had been considerably refreshed by hearing the testimony of Wormser; that her father had implored her not to marry her first husband and that, being an old-fashioned man he disapproved strongly of her obtaining a divorce; that her father did not approve of a young person indulging in any pleasure or doing anything “except sitting at home and folding one’s hands”; that she had to do as her father told her and that he thought it best to have the money “tied up”, and that she remembered how her father “deviled” her about the matter a great deal, as did also her brother, with whom she was living.

When her counsel asked her if that (evidently referring to the testimony she had just' given) had anything to do with her signing the letter, in question she replied:

“I cannot say it had anything to do with my signing that letter. I must have at that time felt it was necessary for me to do as my father wished.”

The chancellor then asked her: “If that be true, then you must have had some idea of the character of the obligation into which you were entering when you signed it?” She replied: “I did,-but I did not to the extent—it did not occur to me, did not enter by mind as to whether or not I could change it. I really was to do something that my father told me. My mind was •rather distraught at the time, and if my memory has not been very clear, Mr. Wormser has refreshed it considerably. I knew that in any event I should receive the mcpey. I had absolute confidence in Mr. Wormser and in my father. I knew it belonged to me and I would get it, but I knew my father would be very unpleasant to deal with if I did not do as he pleased in that. In fact, that was always the way I had to do, as he pleased, or I had to suffer the-consequences.”

Counsel for Mrs. Van Ness first urged as a ground for the reversal of the decree of the trial court that, if the letter of June 8,1923, by its terms, created a trust, the chancellor should have set it aside under the circumstances surrounding its execution. They contend that she signed the document under stress of fear of displeasing her father if she did otherwise, and that Wormser having acted as the attorney for the father for a number of years, his suggestions or advice were the same as if made or given by her father.

In support of this contention, counsel cite the cases of McLaughlin v. McLaughlin, 241 Ill. 366, and Tanner v. Tanner, 326 Ill. 302. In the former case the Supreme Court of this State said:

“In the case of a deed from a child to a parent the presumption of undue influence arises as a matter of law, but in case of a deed from a parent to a child, no such presumption of law arises.”

In the second case it appeared that a mother possessed a dominating influence over her 21-year-old son who was living with her and who said, in reference to the division of certain property, that he would be satisfied with a pigpen if his mother gave it to him. His father had died leaving a will. By virtue of an agreement and a parol partition, the mother received a much larger portion of the estate than she was entitled to under the will. The court, in stating the rule applicable to such a state of facts, said:

“When two persons stand in such relationship that confidence is necessarily reposed by one in the other, and the influence which naturally grows out of that confidence is abused while such confidence continues, or an advantage is obtained by reason of such influence over the confiding party, the person seeking such advantage will not be permitted to retain the same although the transaction could not have been impeached if no such confidential relation had existed.”

We do not consider either case applicable to the facts in the instant case. Mrs. Van Ness was 28 years of age when she testified. Prior to her second marriage she had been married and divorced, both acts being over the vigorous protests of her father, according to her own testimony.

It is clear that in respect to these matters she was not dominated by the will of her father. Neither grandparent derived any financial benefit from the transaction. In fact just the contrary was true. The paternal grandfather relinquished any claim to be reimbursed for moneys paid on account of premiums on the insurance policies. The father of Mrs. Van Ness was supporting her and her children, and he expressed a willingness to continue so to do as long as she remained in Chicago. The grandparents were making-financial concessions to induce her to do what she should have done, without suggestion from anybody, i.e., to conserve the corpus of all that she possessed in the world for the benefit of her minor children.

Counsel place great reliance upon the case, of Finucan v. Kendig, 109 Ill. 198. They quote from, it in their brief as follows:

“Appellants’ counsel have, in their argument, gone very elaborately into the doctrine of the court of chancery on the subject of voluntary settlements, in the particular of there being the absence of a power of revocation in such a settlement, citing very many English authorities upon the subject, in some of which may be found remarks going quite far in the direction that a power of revocation ought to be inserted in such a settlement, or the settler should have been advised that there should be a power of revocation inserted in it; but we think the conclusion to be drawn from all the authorities is, that there is no such rule that the want of a power of revocation in a voluntary settlement, or the want of advice as to the insertion of such a power, will afford ground, in equity, for the donor to set aside such a settlement, but that the same is a circumstance, and a circumstance merely, to be taken into account in determining upon the validity of the settlement, and of more or less weight, according to-the facts of each particular case. See Toker v. Toker, 3 DeG. J. & S. 487; Hall v. Hall, L. R. 8 Ch. App. 437; Bill v. Cureton, 2 Mylne & Keene, 503; Petre v. Espinasee, id. 496; Kekewich v. Manning, 1 DeG. M. & G. 176; Jenkins v. Pye, 12 Pet. 241.”

The case is in fact adverse to the contentions of counsel because it holds “that there is no such rule that the want of a power of revocation in a voluntary settlement, or the want of advice as to the insertion of such a power, will afford ground, in equity, for the donor to set aside such a settlement, but that the same is a circumstance, and a circumstance merely, to be taken into account in determining upon the validity of the settlement, and of more or less weight, according to the facts of the particular case.”

If a woman, of mature age, is advised by her attorney to place certain funds beyond her reach and in a place where she would not be tempted to use any of the principal, so that the corpus would be conserved for the benefit of her minor children, and she accepts the suggestion by the execution of a formal document, the insertion of a clause giving a power of revocation would thwart the very purpose of the undertaking. Mrs. Van Ness does not directly deny that Wormser did so advise her.

A number of reasons are advanced to show that the letter of June 8,1923, was not, by its terms, creative of a trust. It is argued that no trustee is designated and that the instrument is incomplete on its face in that the language used assumes the death of Mrs. Van Ness simultaneously with the attainment of 21-years of age of her youngest surviving child. These points are wholly without merit. Again it is urged that the letter shows that a more formal instrument was to be prepared because of the language:

“Whatever formal instrument may be needed to effect this trust can be drawn when you return from Washington.”

We cannot agree with this contention. No formal instrument was needed to effect the trust created. She never demanded a more formal trust indenture and until one was prepared and executed she must have intended that the letter remain in full force and effect. In fact when she was requested to execute a trust agreement with the Union Bank of Chicago, which had been approved by her attorney, she refused.

Complaint is made because attorney’s fees were allowed to Wormser for legal services rendered, at his instance, by members of his firm. The chancellor found that, in preserving and defending the trust estate, it became necessary to employ counsel. With this finding we agree. We cannot think of any good reason why he should not have employed members of his own firm in whom he is presumed to have reposed the utmost confidence. Neither do we think that the fees allowed were excessive.

It is next contended that the chancellor erred in finding that Wormser, rather than his firm, was the trustee appointed by the instrument of June 8, 1923. This position is untenable. The mere fact that Wormser used the facilities of the firm in making investments, collecting dividends, and issuing checks did not and could not constitute the firm trustees.

Counsel also say that the chancellor erred in directing Wormser to defend this appeal. If he had been unsuccessful in sustaining his position in the trial court the chancellor might well have hesitated in giving him such authority, particularly if he was to be reimbursed for expenses and solicitor’s fees out of the funds in controversy. If he had the right to defend and preserve the trust in the trial court, and was there successful in sustaining the trust, as he was, we preceive no reason why he should not be authorized to pursue the same course in this court.

Counsel in support of their contention that the court erred in allowing the payment of the guardian ad litem’s fees out of the trust estate, cite Hutchinson v. Hutchinson, 152 Ill. 347 and Gagnon v. Burton, 107 Ill. App. 506. Neither case is in point. In each case the trial court taxed the solicitor’s fees dor the guardian ad litem as costs against the complainant in the suit. In the instant case the fees were ordered to be paid out of the trust estate.

We have examined the testimony of Isaac S. Rothschild, the guardian ad litem. He has been a practicing attorney at the Chicago Bar for over 30 years. He did not merely render the perfunctory service of filing the usual, formal answer on behalf of the minors, but rendered services as an attorney. The allowance made to him, in view of the services rendered, was not excessive.

Finally it is urged that the trial court erred in directing the guardian ad litem to defend this appeal. From time immemorial minors have been considered wards of the State and entitled to protection in courts of chancery where their custody or property rights are involved. The court owes the duty to see to it that they are properly represented and their rights carefully safeguarded. In the instant case the interests of the minors were in the trial court and are here adverse to that of their mother. They were entitled to representation from the inception of the litigation until its final culmination. This included the right to be represented in connection with the various steps to be taken in perfecting this appeal. The contention is unsound.

For the foregoing reasons the decree of the circuit court of Cook county is affirmed.

Decree affirmed.

Wilson, P. J., and Holdom, J., concur.


author: Mr. Presiding Justice Barnes

text:
    Joseph H. Buttas et al., Appellees, v. Juddson Hotel Company et al. Lizzie Lee Judd and Edward S. Judd, Appellants.
    Gen. No. 33,596.

      Opinion filed March 11, 1930.
    Mayer, Meyer, Austrian & Platt, for appellants; M. Paul Noyes, of counsel.
    Poppenhusen, Johnston, Thompson & Cole, for certain appellees; Edward R. Johnston and James W. Hyde, of counsel.
   Mr. Presiding Justice Barnes

delivered the opinion of the court.

The bill in this case was filed to enforce mechanics’ lien claims. The decree as to them is not questioned. Reversal is sought so far as the decree directs foreclosure of a trust deed of the premises as asked for in a pleading of certain defendants in the nature of an intervening petition or cross bill. The petitioners are Greenebaum Sons Bank and Trust Company, individually and as trustee, and Greenebaum Sons Investment Company, as holders of bonds issued by the Juddson Hotel Company, to secure which the trust deed was executed by said hotel company as maker of the bonds, and appellants, Lizzie Lee Judd, the owner of the fee, as mortgagor, and Edward S. Judd, her husband.

The controlling facts, all of which took place in 1922, are not in dispute. Early that year Mr. Judd (who acted for his wife in the negotiations), was approached by a representative of H. L. Stevens and Company, a copartnership, hotel builders and managers, with respect to organizing a building corporation to lease Mrs. Judd’s property for 99 years and erect thereon a 10 or 11-story apartment hotel. After conferences (at one of which Mrs. Judd was present) with reference thereto and as to financing the construction, Greenebaum, Sr., president of the investment company, was approached with reference to a loan on the leasehold, but refused to consider one without a mortgage of the fee. Thereupon after terms and conditions of a mortgage loan were discussed among them it was verbally understood that they were to be embodied in a loan agreement to be signed by the hotel company as the borrower, and that Mrs. Judd would mortgage the fee to secure the loan, and the two instruments were subsequently executed.

The order of correspondence and events pertaining to the subject matter is as follows:

On March 20, (after conferences as aforesaid) Judd wrote a letter to H. L. Stevens and Company, offering on behalf of himself and wife, to lease the premises in question for 99 years to a building corporation, and stating therein that the lessee is “to procure a first mortgage loan not exceeding $1,000,000 in amount, the proceeds to be used in construction and furnishing of building according to plans mutually agreed upon, and Mrs. Judd and I will convey the fee simple title to secure payment of such mortgage loan, but are not to assume personal obligation for payment thereof,” and that H. L. Stevens & Company would, at their own expense, prepare plans and specifications for the building and attend to the financing, construction and operation of the completed building, and that after making the lease the lessor should receive 25 per cent of the stock of the company operating the building.

On April 24, Stevens & Company wrote a letter to the investment company outlining what it would do with reference to the project based on a building at a cost of $800,000, and a cost of $175,000 for furniture and furnishings. It proposed a first mortgage loan of $890,000 (valuing the site at $150,000), that it would make a cash investment of $20,000, design and supervise the construction and equipment of the building, guarantee the owner of the property that the cost of the building would not exceed $800,000, and if it did, Stevens & Company would assume and pay such excess, and would also guarantee the trustee completion of the building free from liens of any kind.

Under date of May 18, acknowledged June 27, the trust deed was executed by the hotel company and Mr. and Mrs. Judd as aforesaid, conveying the premises to said trust company as trustee, and the leasehold interest therein, to secure said hotel company’s indebtedness to the holders of 1,700 bonds of said company aggregating the principal sum of $875,000. The deed contains the usual protective provisions and covenants and those for foreclosure by the trustee in the event of breach by the maker or mortgagor of any of their respective covenants. Specific provisions therein will be referred to later.

On May 27, Stevens and Company entered into a written contract with the Juddson Hotel Company for constructing, furnishing and equipping the proposed Juddson Hotel, and guaranteeing that the cost of the building, without furnishing and equipment, if constructed in accordance with preliminary sketches and detailed plans to be thereafter prepared by them, would not exceed $800,000.

Under date of June 1, 1922, acknowledged June 27, the 99-year lease referred to was also executed by Mrs. Judd and her husband, demising the premises to the hotel company subject to the terms of the trust deed. It provided that the hotel company would within 60 days commence the erection of the building on the premises substantially in accordance with the plans and specifications and complete the same by July 1, 1923, free and clear of mechanics ’ and other statutory liens.

On June 12, said hotel company and the investment company entered into a written agreement in the form of a proposal by the former to the latter, and an acceptance thereof. After reciting therein the ownership of the land by Mrs. Judd, her interest in the hotel company, the value of the land and proposed improvements, and the requirement of $875,000 for the construction and equipment, the instrument proposed the execution and issue of a series of bonds by said hotel company aggregating said amount, bearing interest at the rate of 7 per cent from July 1,1922, and specifying their respective amounts and dates of maturity. The agreement then stated that the hotel company would cause Mrs. Judd and her husband to execute a trust deed to the trust company as trustee of the premises and the building to be erected thereon, to secure said series of bonds, and that it would give a chattel mortgage on all the furnishings, etc. The agreement then provided that the hotel company would sell to the investment company said issue of bonds at 92 per cent of their face amount, and pay certain preliminary expenses, to wit, the cost of abstracts of title for a mortgage guaranty policy, engraving, etc., the bonds and coupons, printing the trust deed and chattel mortgage, attorneys’ fees and other usual incidental expenses, and that the investment company might retain out of the purchase price of the bonds an amount sufficiént to pay interest accruing the first year and apply the same to the payment thereof as it accrued.

The agreement also provided that no part of the purchase price of the bonds need be paid out until the investment company was satisfied that funds had been provided by the hotel company sufficient to clear all liens prior to the lien of the trust deed and chattel mortgage, and that the investment company was not obligated to pay any part of the purchase price until satisfied through a mortgage guaranty policy that the deed was a first lien upon the real estate, and that if the hotel company failed to carry out any of the provisions of the agreement it would, in addition to reimbursing the investment company for moneys expended and expenses incurred, as aforesaid, pay it $5,000 as liquidated damages to compensate the investment company for its loss, and upon such reimbursement the agreement should be terminated.

In the latter part of July and first part of August detailed plans were prepared by Stevens and Company, the architects and contractors, for the building, and contracts were let for the excavation, shoring and foundation. The work thereon started July 17, and continued until in December when construction ceased and was never resumed. The hotel company expended on that work about $20,000, all the money it had, no part of which was advanced by the investment company. It then, about October 1, applied to the investment company to advance money for building construction. A controversy then arose between the hotel company and the Stevens firm on one hand, and the investment company on the other, growing out of changes made in the plans in the meantime that would require an estimated additional cost of about $77,000 over the net proceeds of the loan available for construction purposes, and about October 10, 1922, the investment company refused to make any advances for the building unless the hotel company or the Stevens firm should first provide the necessary additional funds. Conferences were thereupon had, in some of which Mr. Judd took part, but they resulted in no further arrangements and the construction work ceased December 2 because of lack of funds.

On August 15 the investment company placed on its. books to the credit of the hotel company the sum of $805,000, being 92 per cent of the face amount of the bonds, the agreed purchase price which is $70,000 less • than their par value. While the master refers to said $70,000 as a “commission” on the loan, there is no reference to a “commission” in the contract for the loan. In reality it represents the “discount” from the par value of the bonds at which the purchase was made.

Prior to that time the investment company had paid out in preliminary expenses, provided for as aforesaid, the sum of $7,475.25.

On and after August 21, the investment company had sold all of the issue of bonds except $10,000 thereof. Having determined on October 10 that no money would be paid out on the loan it thereafter bought them back, paying what interest would have accrued thereon, which, after deducting interest it had allowed on its back credit as aforesaid, amounted to $23,628.33.

On October 16, the trust company served the hotel company and Mrs. Judd with notice of defaults. The bill to enforce mechanics ’ liens was filed March 8,1923, and the intervening petition, December 21, 1926.

The decree confirms the master’s report and findings that the investment company has a lien on the premises under the trust deed for said sum of $7,476.25, with interest at 5 per cent from August 4,1922, and costs of suit; for its “commission” of $70,000 with interest thereon at 5 per cent from August 15, 1922, and for interest on said bonds paid out as aforesaid, in net amount of $23,628.33 with interest thereon at 5 per cent per fl-nmrm from January 1, 1923, the date the first instalment of interest became due on said bonds.

Upon the above state of facts petitioners contend that said bonds are the valid and outstanding obligations of the maker for which the investment company paid the maker consideration, and that as such they are secured by the trust deed.

Appellants contend that the trust deed cannot be enforced against Mrs. Judd to charge her land with duties and obligations of the hotel company, created only under the loan agreement to which she was not a party and which was in no way referred to in the trust deed, and because no proceeds from the funds were used in the construction upon the premises of the apartment hotel building, as contemplated by the trust deed, and therefore the trust deed was without consideration as to her.

The real question, under the foregoing state of facts, is not what are the obligations of the hotel company under its agreement for the loan, but whether in view of these facts and the terms of the trust deed a foreclosure thereof as against Mrs. Judd will lie. To determine that question we must look not to the loan agreement, to which Mrs. Judd is not a party and which is in no way a part of the trust deed nor capable of being read into it, but to the trust deed alone whereby she pledges the fee to the premises, not to secure the carrying out of the terms of the loan agreement, but to secure payment of the bonds issued pursuant thereto, only however upon such terms and conditions as are prescribed in the deed.

The parties to the deed are the Juddson Hotel Company as “maker,” party of the first part, Mrs. Judd as “mortgagor;” party of the second part, and said' trust company as “trustee,” party of the third part. It recites that the “maker” is justly indebted to the legal holder or holders of the 1700 bonds and that ‘the proceeds of the sale of the said bonds are to be used by the maker to pay for the construction, upon the premises owned by the mortgagor hereinafter described, of an apartment hotel building, with necessary machinery, fixtures and equipment therefor as provided in section 1 of article II hereof. ’ ’ In some of the articles the maker and mortgagor covenant separately.

Said article II contains covenants and agreements by the maker only, and said section provides in substance that the maker will without unnecessary delay cause to be constructed and completed upon said premises the 10-story apartment hotel building provided for in the plans and specifications theretofore filed with the trustee, and in case of the maker’s failure to do so the trustee may at its own election construct and complete the erection of the building, etc. Article III provides that on certain steps being taken by the holder or holders of “outstanding” bonds in case of default to pay interest when it becomes due and payable or in case of a breach of any of the covenants by the maker or mortgagor and a continuance of those conditions for a certain time the total principal sum evidenced by all the bonds then ‘ * outstanding and unpaid,” shall thereupon become due and payable at once.

The intervening petition sets up that prior to December 1, 1922, the investment company had sold some of the bonds as aforesaid to innocent purchasers in whose hands they were “outstanding,” that it credited the hotel company with “$875,000” pursuant to its directions and had paid out the various sums as above enumerated ; that within three months after abandonment by the hotel company of the further construction of the building it repurchased all of the bonds so sold for their face value and accrued interest “and thereupon succeeded to the rights of the holders of the bonds from whom it purchased”; that the hotel company and Mrs. Judd failed to comply with and made default under the terms and conditions of the trust deed in failing to complete the apartment building, in abandoning the erection thereof, in not keeping’ the hotel company alive by making reports required by the State of Illinois, by nonpayment of taxes for 1922 and subsequent years, and suffering mechanics’ liens to be filed against the property, and that there is now due and unpaid the aggregate sum of the aforesaid items with interest, etc.

So far as the right to relief asked for is predicated upon abandonment of construction of the building, it appears that such abandonment was a necessary consequence of the refusal of the investment company to make any advancement upon the loan for the construction. In other words, it clearly appears that it refused to consummate the loan and in effect rescinded the agreement therefor before there was an abandonment and not because of an abandonment but because of a breach of the borrower’s contract in respect to the plans according to which the building was to be constructed.

And so far as the pleading is predicated upon the theory that the investment company stands in the position of successor to the rights of innocent bondholders from whom it repurchased the bonds, it is manifest that the company did not buy them back for investment or without notice of appellants’ equities but evidently for its own protection against the embarrassment and unpleasant consequences of its refusal to consummate the loan. When it rescinded the contract, therefore, it would appear that its position with respect to appellants was practically the same as if it had never attempted to sell them.

The defaults of which the maker and mortgagor were given notice and on which the foreclosure proceedings were based, are: (1) The failure to comply with said section 1, article II as to the maker’s delay to construct the building provided for in the plans and specifications filed with the trustee and abandoning the erection thereof, and (2) in suffering mechanics’ liens to be filed.

It will be noticed that the foreclosure is not predicated upon default to pay the bonds or interest thereon. When the investment company refused to go on under the loan agreement not one of those bonds or any interest thereon had become due under their terms or those of the trust deed. We think, therefore, the interveners ’ rights must be viewed in the light of the facts as they stood at that time; and that is practically the theory of their petition and that of the master’s report, for his findings are in effect that the investment company is entitled to a lien for expenses it'had been put to up to that time by reason of the Hotel Company’s breach in consequence of which it was justified in refusing to “open up the loan and pay out the avails of the loan,” and also a lien for the loss of its “commission” and for the liability it incurred for interest on the bonds it had sold—manifestly in expectation of its consummating the loan. In other words, the relief sought by the investment company is to be placed back where it stood when it refused to consummate the loan. It will thus appear that it is sought to establish a lien under the trust deed for what was merely in the nature of damages for the hotel company’s breach of contract —a contract to which the owner of the premises is in no way a party. And it may be said here that we do not regard any alleged conversations which Mr. Judd had preliminary to the execution of the trust deed as competent or material to the determination of Mrs. Judd’s liability under it. So far as she is concerned they were merged in the trust deed to which alone we must look for determining her liability.

And, too, it is somewhat difficult to reconcile the theory of a default in failing to go on with the construction of the building with the unquestioned fact that the investment company prevented such failure by not advancing the money for that purpose, as was-clearly contemplated by the contracts. In other words, the investment company’s right of action seems to be for expenses it had been put to because of the hotel company’s breach of its contract in changing the plans and specifications. It is upon that breach that it acted and not upon anything covenanted to be done, or omitted to be done, by the mortgagor. It may have a right of action against the hotel company under the loan agreement which expressly provided that if that company failed to carry out any of the provisions of that agreement it would in addition to reimbursing the investment company for money expended and expenses incurred, as aforesaid, pay it $5,000 as liquidated damages to compensate the investment company for its loss. But it is another question whether under the circumstances, where the investment company has agreed to make a loan and advance money thereon for the specific purpose of constructing the building and has refused to advance a dollar for that purpose and has thereby prevented the hotel company from going on with the construction, it can enforce a foreclosure of Mrs. Judd’s premises under the trust deed which in effect covenants that the proceeds of the loan it purports to secure shall be used in such construction. That such is the clear import of the trust deed, though the provision is not'in the express words of a covenant, can hardly be questioned.

It is perfectly obvious that Mrs. Judd had nothing to gain but everything to lose in pledging the fee of her land to secure such a large issue of bonds unless the contemplated building was erected thereon. It was evidently for her protection that such provision was inserted in the trust deed. It was expressly understood that she was not to assume personal liability on the bonds, and she did not. She merely pledged her property as security therefor on the conditions and terms of the trust deed. Her relation was that of a surety. (Price v. Dime Savings Bank, 124 Ill. 317, 324; Ryan v. Shawneetown, 14 Ill. 20.) And liability as such cannot be enlarged beyond the express language of the instrument creating the liability. (McCartney v. Ridgway, 160 Ill. 129, 159, 160.) Nor do we think the fact that Mrs. Judd was desirous of having the hotel company erect a building on her premises or contemplated taking stock in the company that leased the premises for that purpose, can be regarded as in any way enlarging her obligations under the trust deed, or as modifying its express terms.

As we view the case, therefore, the salient facts are: The hotel company seemingly breached its contract for the loan in changing the character of the plans of the building contemplated both in the agreement for the loan and the trust deed. When this was disclosed by the submission of completed plans to the investment company, and the interested parties failed to agree upon a modification of the plans or to provide for the additional expenditure the change would entail, the investment company then refused to advance a single dollar on the loan for construction purposes and in effect rescinded or failed to consummate its agreement for the loan. Conceding that it had a right to do so because of said breach, it then had a remedy for damages against the hotel company for the breach as expressly provided in the loan agreement.

But whatever damages it may have been entitled to thereunder is not the test of Mrs. Judd’s liability. They may include the preliminary expenses, said “commission,” and resultant expenses, including the interest item aforesaid, in getting back the sold bonds. But Mrs. Judd did not agree to pay any of them. Her trust deed expressly contemplated future advances from the proceeds of the loan to be used in the construction of the building. Otherwise the loan was of no material benefit to her and there was no consideration moving to her for executing the trust deed. The sale of the bonds was for $805,000. The proceeds therefrom, were never made available for the purpose contemplated by the trust deed. As stated by the master the investment company refused “to open up the loan.” Not one dollar thereof went into the building. Placing on the investment company’s books a credit to the hotel company of $805,000, the net proceeds of the sale, was a mere bookkeeping entry. Neither the discount of $70,000 on the sale nor the preliminary expenses paid out under the loan agreement nor the interest paid out in taking back the bonds can be construed as having been used in the construction of the building within the intendment of the trust deed. So far as Mrs. Judd’s liability is concerned, the situation is the same as if without a breach of the loan agreement by the hotel company the investment company had, after paying said preliminary expenses as therein provided, concluded to abandon and not consummate the agreement for the loan. No one can question that in such a case the consideration for the trust deed would have failed.

Had the loan been actually consummated and some part of it actually gone into the structure and subsequently there had been defaults within the provisions of the trust deed the case might present a different aspect. But under the circumstances, whatever claim the investment company may have against the hotel company to be reimbursed for damages it has sustained by reason of the latter’s breach of contract, it cannot be said that the items constituting them are “proceeds from the sale of the bonds,” or that they were used in the construction of the building as contemplated by the trust deed.

There was a very similar state of facts in the case of Freutel v. Schmitz, 299 Ill. 320. There Mrs. Zemon and her husband conveyed by two trust deeds two certain lots owned by her to secure future advances for erecting a building on each. Shortly afterwards she and her husband executed a quitclaim deed of the properties to Freutel. As to liabilities under the trust deeds he stood in their shoes, and later filed a petition to cancel the deeds as clouds upon the title claiming that as no money was ever advanced on the loan there was no consideration for the deeds. Schmitz who had contracted to make the loan claimed interest on the same for the period it had been set apart (as he claimed) for that purpose, and also the recording fee and certain preliminary expenses including commissions for the loan, based upon an alleged verbal agreement with the husband tq pay the same. The examiner to whom the matter was referred reported that the trust deeds were null and void, that no consideration was given therefor, that they should be canceled of record, and that while Schmitz was entitled to recover from the husband the amounts claimed, he had no lien upon the property for them and recommended a disallowance of Schmitz ’ claims. The chancellor decided otherwise and allowed them. The Supreme Court sustained the examiner. In respect to said claims and the transactions on which they were based there is a close analogy in that case between the position of Mr. Zemon and the hotel company and that of Freutel and Mrs. Judd. There, as here, the trust deeds were given to secure money to be advanced. The notes secured by the trust deeds were signd by both Mr. and Mrs. Zemon. The court said that while Freutel took their place as makers of the trust deeds, so far as any lien was created thereby, he assumed no personal indebtedness of the makers of the trust deeds not secured thereby. It held that while Schmitz charged himself with the amount of the loan and credited the Zemons therewith on his books “it was only a book entry,” that no money was actually set aside and none was ever advanced, and that if Mr. Zemon agreed to pay a commission for procuring the loan it was not secured in any manner by the trust deeds. Stating the law applicable it said: “If there is no mortgage debt or obligation in existence there is nothing for the mortgage to operate on, and the lien begins only when money is advanced or the contemplated debt comes into existence in the course of dealing between the parties. The lien is measured by the extent of the advances and the amount of the debt.”

There is such a close analogy of facts in the two cases as to make practically all that was said in that case applicable to the facts here. And so we think it may be said here, as was said in the case of Thomas v. Olney, 16 Ill. 53: “The only question which needs to be discussed is whether this loan was in fact made in pursuance of the terms of the mortgage.” Here, as there said, the mortgagors never agreed to assume any personal liability for the loan but pledged their property as collateral security therefor, and as guarantors had the right do prescribe the terms of the guaranty, and no such loan as they agreed to guarantee was ever made.

As to failure of consideration pleaded by the Judds, the facts in some respects are like those in Pittsburgh Plate Glass Co. v. Kransz, 291 Ill. 84. There notes secured by a trust deed were given to secure the balance of a contract price for completing a building. The consideration therefor was the completion of the building. The work thereon was abandoned. It was held that the consideration for the notes failed. "While the consideration of the trust deed here was not for the completion of the building but that the proceeds from the loan should, be used in the construction thereof, they not having been so used the consideration for the trust deed failed.

For the reasons above stated the decree is reversed, in so far as it awards any relief to the intervening petitioners, Greenebaum Sons Investment Company and Greenebaum Sons Bank and Trust Company, individually and as trustee, and the cause is remanded to the circuit court, with directions to dismiss the intervening petition of said petitioners for want of equity at their costs.

Reversed and remanded with directions.

Scanlan and Gridley, JJ., concur.


text:
    Ralph Crandall, Appellant, v. Coyne Electrical School, Inc., Appellee.
    Gen. No. 33,864.
    Opinion filed March 11, 1930.
    Albert E. Grammer, for appellant; Stephen S. Snyder, of counsel.
    Leopold Saltiel, for appellee.
   Mr. Presiding Justice Barnes

delivered the opinion of the court.

This is a suit to recover a tuition fee of $240 paid by plaintiff, when a minor, to defendant. A jury was waived and the issues were submitted to the court upon an agreed state of facts. The finding and judgment were for defendant.

The material facts agreed to are: Plaintiff, when 20 years of age, entered into a written agreement whereby defendant was “to furnish him a course of electrical instruction as taught by it at its school in Chicago,” for which he paid $240 tuition fee. He had no parents or legal guardian. He attended defendant’s school for approximately 5 weeks, when he left and did not return. He made a demand for the return of the money and disaffirmed the agreement both before and after reaching his maturity and defendant refused to return the money. Defendant is willing, ready and able to carry out its contract.

On such state of facts the court ruled that the contract was valid and “one for necessaries of life,” and the real question is whether or not it can be said from such agreed facts that “a course of electrical instruction” is “a necessary.”

It was said in McKanna v. Merry, 61 Ill. 177: “There is no positive rule by means of which it may be determined what are, and what are not, necessaries. Whether articles are of a class or kind for which infants are liable, or whether certain subjects of expenditure are necessaries, are to be judged of by the court. Whether they come within the particular class, and are suitable to the condition and estate of the infant, is to be determined by the jury as matter of fact. ” In 22 Cyc. 597, the author says: ‘1 The question as to what are necessaries is a mixed one of law and fact,” and refers to the case just cited.

It is not questioned that a contract of an infant, is, in general, voidable by him and that he may disaffirm the same either during or after his minority, whether the contract be executed or executory, and recover the money he has paid thereon. (Wuller v. Chuse Grocery Co., 241 Ill. 398.) But appellee relies on the claim that the contract in question was for a necessary. It is recognized that a proper education is a necessary. But what is a proper education depends on circumstances. (31 C. J. 1079.) A common school education is said to be a necessary in this country. (Middlebury College v. Chandler, 16 Vt. 683; International Textbook Co. v. Connelly, 206 N. Y. 188.) In the latter case it is said that circumstances, however, may exist where a more liberal education might properly be found a necessary as a matter of fact. It was there sought to apply the word “necessaries” to a contract by an infant for a course of instruction in “Complete Steam Engineering.” The court held that its application in that case depended on the circumstances and situation in the life of the infant. Holding that the burden of proof was on the party suing on the contract to show what it agreed to provide was a necessary the court said that in the absence of facts of the real circumstances and whether the infant was in a situation to bind himself by a contract for necessaries, the course of instruction contracted for was not a necessary within the meaning of the law.

And so here, we find nothing in the agreed state of facts, in the absence of proof of any other circumstances as to plaintiff’s state and condition in life or what was suitable to his condition, estate and needs, that enabled the court to say that “a course of electrical instruction” was “a necessary” for him, either as a matter of fact or of law. The burden of proof was upon defendant to sustain its plea that such instruction was in the nature of a necessary suitable to the infant. (22 Cyc. 598.) The meager state of facts agreed upon is not sufficient to warrant the court’s conclusion.

Accordingly the judgment will he reversed and a judgment entered here against appellee for $240, and interest thereon at the rate of 5 per cent from August 30, 1927, the date when plaintiff began his suit, there being no proof in the record as to the date of the demand for the return of the money.

Reversed with a finding of fact.

Scanlan and Gridley, JJ., concur.

We find that the money sued for and held by appellee is not money given and held for necessaries.


text:
    Celia Laffey, Appellant, v. Ross A. Woodhull, Appellee.
    Gen. No. 33,908.
    Opinion filed March 11, 1930.
    Rathje, Wesemann, Hinckley & Barnard, for appellant ; Francis E. Hinckley, of counsel.

      Thomas J. Peden, Patrick J. Murphy and Gerald Ryan, for appellee.
   Mr. Presiding Justice Barnes

delivered the opinion of the court.

This was a suit for rent reserved in a lease from plaintiff to defendant for a year from October 1,1926, for the monthly rent in advance of $200. Under a warrant of attorney contained in the lease a judgment for the rent for the months of May and June, 1927, was entered. On defendant’s motion the judgment was vacated and defendant given leave to defend, his petition to vacate standing as his affidavit of merits. A trial was had without a jury. The court found the issues against the plaintiff, vacated the judgment by confession and entered judgment against the plaintiff for costs, from which she appeals.

Defendant claimed a constructive eviction by reason of the failure of appellant to supply hot water and heat as provided for in the lease wherein the landlord expressly agrees to “supply hot water for the use of said tenant out of all hot water faucets in said apartment, and the heat for the heating apparatus in said building. The heat is to be furnished at all reasonable hours, day or evening, when necessary, from the first day of October until the thirtieth day of April of the succeeding year.” The lease then states that the lessor shall not be liable in damages “for unavoidable delay or any other reasons whatsoever in not furnishing hot and cold water or heat for the heating apparatus,” and then proceeds to say: “Also in the event that there is not sufficient heat supplied, the party of the second part hereby waives any and all right to claim an eviction.” Anomalous as this final clause is, and inconsistent with the covenant to furnish heat at all reasonable hours, etc., perhaps it was by reason of this provision that the court on plaintiff’s motion at the close of the trial struck out all evidence relating to failure to furnish heat. The court, however, held that there was a failure on the part of plaintiff to supply hot water as covenanted in the lease, and that such failure constituted a constructive eviction.

To the ruling excluding the evidence relating to failure to furnish heat, appellee has filed cross errors. But we do not deem it necessary to consider them, although the evidence on that subject tended to show plaintiff’s utter and persistent disregard of that covenant after numerous complaints of the breach were made, and that her disregard thereof was a continuing breach of that covenant. Unless the final quoted clause of the lease would preclude defendant from setting up the breach, the judgment might well have rested on a constructive eviction by reason of the failure to furnish such heat as well as upon the failure to furnish hot water.

However, if the evidence was sufficient to sustain a constructive eviction for failure to furnish hot water we need not consider the cross errors.

It appears from the evidence that defendant found it necessary to complain at frequent intervals to plaintiff, and to her renting agent who brought such complaints to plaintiff, of the lack of not only sufficient heat but of hot water; that on numerous occasions during his occupancy he had complained to plaintiff that he had “let the water run and run” without getting any hot water either for a bath or common domestic purposes, and that it became necessary on many occasions to heat hot water on a gas stove to meet household demands therefor.

Plaintiff had no janitor. She took care of the boiler and the firing herself. The building contained some 14 apartments. Defendant rented one of them. On each occasion when complaints of inadequate heat and no hot water were made by defendant or some member of his family plaintiff promised to do something about it. Several times after complaints, plaintiff’s agent examined the premises and found that there was insufficient heat or pressure to furnish either heat or hot water and on those occasions started up the fires himself until the proper pressure was registered. Sometimes plaintiff’s sister went to the basement and threw in coal. Other tenants also complained of such conditions. On each occasion defendant relied on plaintiff’s verbal promises that she would see about it. At intervals requisite heat and hot water would be furnished \and then again occasions would arise for similar complaints. These complaints became more and more frequent. Plaintiff as often renewed her promises and indicated in various ways her intention to remove the causes of complaint. Finally in the - month of April defendant came home sick and needing and being unable to get hot water, notified the agent that the promises not being fulfilled he would leave the premises. He left them April 21. The rent was paid up to May 1. This suit is for the rent of May and June.

There was no attempt on the part of plaintiff to controvert any of the evidence of this state of facts. They were sufficient, in our judgment, regardless of the failure to furnisfy heat, to warrant the court’s finding and judgment.

Without disputing the facts appellant urges that to constitute an eviction there must be something of a grave and permanent character done by the landlord with the intention of depriving the tenant of the enjoyment of the demised premises. There was practically a continuing breach of the covenant to furnish hot water. That the failure to comply with the terms of the lease in‘this respect after so many complaints and failure to fulfil plaintiff’s promises to remedy the matter amounted to a wilful failure and was intentional on the part of the landlord is hardly open to question.

Nor in the light of modern conditions can it be doubted that the failure to furnish hot water tended to deprive the tenant of the use and enjoyment of the premises contemplated by the leasp, and in that respect constituted a constructive eviction. As said in Barnard Realty Co. v. Bonwit, 155 N. Y. App. Div. 182, 139 N. Y. Supp. 1050:

“Very large numbers of people live in tenement houses, apartment houses, and apartment hotels. . . . Such tenants have, and can have, control only of the inside of their own limited demised premises,. Conditions unknown to the ancient common law are thus created. This requires elasticity in the application of the principles thereof. An intolerable condition, which the tenant neither causes nor can remedy, seems to me warrants the application of the doctrine of constructive eviction. ’ ’

The lease expressly provided for supplying hot water for the use of the tenant out of all hot water faucets in • said apartment. The evidence clearly shows there was no compliance with this covenant. In view of modern usages and ways of living, and the methods of supplying conveniences therefor in modern apartments, it can hardly be doubted that supplying hot water for the ordinary comforts of life is as indispensable to the enjoyment of rooms in an apartment building as other usual forms of service the landlord covenants to furnish, such as heat, elevator service, etc.

In Gibbons v. Hoefeld, 299 Ill. 455, the proof tended to show that by reason of the failure of the landlord to perform his duty a portion of the rented premises became flooded so as to render them untenantable. The court held that the determining factor was not whether the landlord intended the result but whether he wilfully refused to fulfil his promise or so negligently performed it that what he did was of no benefit in protecting the tenant in the enjoyment of the demised premises. In Keating v. Springer, 146 Ill. 481, the court said: “But the landlord, without being guilty of an actual physical disturbance of the tenant’s possession, may yet do such acts as will justify or warrant the tenant in leaving the premises. The latter may abandon the premises in consequence of such acts, or he may continue to occupy them. If he abandons them, then the circumstances which justify such abandonment, taken in connection with the act of abandonment itself, will support a plea of eviction as against an action for rent.” In Kinsey v. Zimmerman, 329 Ill. 75, it was held that where there was testimony of repeated unavailing requests by the tenant to the landlord to repair a leak that had a tendency to deprive the tenant of the use of a room for the purposes of his business, that such evidence tended to establish a constructive eviction. It was said in Lawler v. McNamara, 203 Ill. App. 285, that it is now well settled law that failure of the landlord to furnish heat in an apartment in accordance with the terms of the lease amounts to a constructive eviction which justifies the tenant in abandoning the premises. It was held in Allmon v. Davis, 248 Ill. App. 350, that where the premises were demised to the tenants to be used as a dwelling, and the condition of them was such that it was impossible to obtain water for personal or other use that there was a constructive eviction.

We see no good reason for making any distinction between a breach of contract to supply hot water in an apartment, a necessity and convenience usually contracted for and expected in modern city apartments, and a failure to furnish heat or other forms of services necessary and covenanted for to make the premises tenantable.

As before stated, it appears that defendant protested, continuously and repeatedly, against the failure to supply adequate heat and hot water, and that plaintiff has continuously promised to remove the cause of the failure. Relying upon the fulfillment of these promises defendant did not abandon the premises until confronted with the serious condition referred to. It is contended that his retention of the premises constituted a waiver. But where the breach is of a continuing nature the waiver of past breaches does not preclude taking advantage of subsequent or continued breaches. It is said in Tiffany on Landlord & Tenant, vol. 2, p. 1264: “A delay in abandonment is, however, it seems, excused, if this is the result of promises by the landlord to remove the cause for abandonment. And though the tenant fails to abandon the premises on account of conditions justifying him in so doing, this does not prevent him from so doing on a subsequent renewal of such conditions in a more aggravated form and from then asserting an eviction.”

In view of the fact that plaintiff did not see fit to controvert the facts showing her violation of the covenant to furnish hot water, we think, regardless of any other facts pleaded in defense and the ruling of the court with regard thereto, the judgment should be affirmed.

Affirmed.

Scahlah and Gridley, JJ., concur.