text:
    Architectural Decorating Company, Complainant and Appellee, v. Stacey J. Shaw and Ralph Sollitt and Sons Construction Company, Defendants. National Fowler Bank, Intervening Defendant. National Fowler Bank and Ralph Sollitt and Sons Construction Company, Appellants.
    Gen. No. 36,822.

      Opinion filed March 6, 1934.
    Heard in the second division of this court for the first district at the June term, 1933.
    Stearns & Jones, for appellant National Fowler Bank.
    Sanders, Childs, Bobb & Wescott, for appellant Ralph Sollitt & Sons Const. Co.; William A. Bradford, of counsel.
    Eckert & Peterson, for appellee; Chilton P. Wilson, of counsel.
   Mr. Justice Gridley

delivered the opinion of the court.

On September 14, 1931, complainant recovered a judgment in the circuit court of Cook county for $4,932.49, against Stacey J. Shaw on his judgment note. After execution had been returned “no property found and no part satisfied,” and by virtue of section 49 of the Chancery Act (Cahill’s St. 1931, ch. 22, Ü 49, p. 244), complainant, on September 28, 1931, filed a creditor’s bill against Shaw and the Ralph Sollitt & Sons Construction Co. (hereinafter called the Sollitt Co.) as defendants. Personal service was had upon the Sollitt Co., but none upon Shaw, who was a nonresident of Illinois. He did not enter his appearance and complainant made no attempt to obtain service upon him by publication or otherwise, and when subsequently the decree now in question was entered, following two reports of the master before whom there were somewhat lengthy hearings of evidence, the court, on complainant’s motion, dismissed the bill as to Shaw, the judgment debtor.- After the Sollitt Co. had filed its answer, the National Fowler Bank, organized under the laws of the United States and having its place of business at Lafayette, Indiana (hereinafter called the Bank), obtained leave to file and filed an intervening petition, was made an additional party defendant, and subsequently filed its answer. The master’s original report was filed on April 14, 1932. Subsequently, on complainant’s motion, the cause was re-referred to him to take additional evidence, and on November 9, 1932, he filed a supplemental report. Both reports were favorable to complainant. The respective objections thereto of the Bank and the Sollitt Co. were overruled and ordered to stand as exceptions. After a hearing the court, on February 23, 1933, entered the decree, in which, after finding that said judgment had been entered against Shaw, that execution thereon had been returned unsatisfied, and that the judgment remained in full force and effect, the court further found in substance: That the Sollitt Co. “has in its possession, due under the contract between the Sollitt Co. and Shaw, the sum of $7,455.66”; that “there is due to complainant the sum of $5,739.75”; that “all of the material allegations of complainant’s bill are proven and are true, and that the respective master’s reports herein filed should be approved and confirmed”; and that “on or about July 16, 1931, the National Fowler Bank promised and agreed with Shaw that it, the Bank, would pay and discharge the indebtedness owing from Shaw to complainant, which indebtedness was the indebtedness merged in the judgment that was recovered against Shaw. ’ ’ And the court Ordered and Adjudged :

That all exceptions to the first and second master’s reports are hereby overruled.

That the bill is dismissed as to Shaw.

That the Sollitt Co. “pay to complainant or its solicitors within three days from this date the sum of $5,739.75, and in default of its so doing that execution issue.”

That “complainant is entitled to recover from the National Fowler Bank the sum of $5,739.75, and judg-ment is hereby entered and decreed against said Bank in said snm in favor of complainant, and that execution issue.”
That “a payment by either party of a part or the whole amount due to complainant shall be credited as payment on the amount due from the other defendant. ’ ’

From the decree the Bank and the Sollitt Co. prayed and perfected their present appeal to this court. And they have here filed by their respective counsel a joint brief and argument, which has been answered by complainant’s counsel, and the cause has been orally argued.

In complainant’s bill it is alleged that it is filed “because of the collusion between the defendants and the National Fowler Bank upon the facts hereinafter set forth”; that Shaw was a contractor and is a bankrupt ; that the Bank claims to have loaned to him various sums of money to pay his debts and, by virtue of certain written assignments, to have the right of collection and recovery of certain of his accounts, credits and assets; that the nature of the assets or how much the Bank has realized because of the assignments are unknown to complainant; that Shaw is a subcontractor to furnish work and material for the construction of a new post office building at Milwaukee, Wisconsin; that the original contractor for the work with the Grovernment of the United States is the Sollitt Co.; that under the subcontract Shaw has done work and furnished materials in large amounts for the building; that the Sollitt Co. either now owes or hereafter will owe to Shaw from time to time, on account of the subcontract, enough moneys to pay in full his indebtedness to complainant as evidenced by said judgment; that the Bank, “attempting to obtain a preference and collect all moneys due to it from Shaw, procured from him, and forced him to give, certain assignments and powers of attorney, so that the Bank could collect all moneys due to Shaw from any source, and so that complainant would not be able to recover any moneys due to it”; that the Sollitt Co. can only pay the moneys due to Shaw according to the terms of the subcontract, which contract complainant has never seen and is, therefore, unable to here set forth the provisions thereof; that complainant does not know what amounts of money are now due and will become due to Shaw, but “is informed and believes and therefore states the fact to be” that there is due or to become due from the Sollitt Co. to Shaw “substantially the sum of $22,000”; and that both defendants, Shaw and the Sollitt Co., can disclose fully and particularly all facts as to the contract, the amounts due or to become due to Shaw, the said assignments and powers of attorney and the transactions between them.

The prayer of the bill is for a discovery, an accounting, and an injunction restraining the Sollitt Co. “from assigning, transferring or paying out any moneys now due or hereafter to become due from it to said Shaw.” And it is particularly prayed “that Shaw may fully set forth and discover the nature, situation and amount of all the property and assets that he now has or has turned over or assigned to the National Fowler Bank; that he state whether he has any property or assets of any kind in Illinois or elsewhere; and that the Sollitt Co. may set forth an account of its contract with Shaw and the amounts due and to become due thereon.”

In the answer of the Sollitt Co., after denying many of the material allegations of the bill, it is alleged in substance:

That on August 27, 1930, Shaw, as a subcontractor, entered into a contract with it, whereby he agreed to furnish labor and materials, and to fully complete the lathing, plastering and stucco work for the post office building at Milwaukee, in accordance with certain plans and specifications, for which it agreed to pay to him the sum of $52,500, — 85 per cent to be paid as the work progressed subject to the approval of a named architect (contract to be produced on hearing); that after the execution of the contract and after Shaw had commenced the work, there was delivered to it (Sollitt Co.) a certain written assignment, “assigning all the funds due or to become due to Shaw under the contract to the National Fowler Bank,” as follows: (Here is set forth the assignment, signed by Shaw and dated at Cincinnati, Ohio, on May 27, 1931, wherein mention is made of the subcontract, and of Shaw’s indebtedness to the Bank “by reason of certain advancements by the Bank to him for the execution of said contract,” and wherein it is stated that the Bank “may make further advances” for that purpose, and that, “in consideration of said advancements” made and to be made, Shaw “assigns to the Bank his rights . . . and subrogates to the Bank his rights and privileges under said contract”); that concurrently with the assignment there was also delivered to the Sollitt Co. a written power of attorney, constituting and appointing the Bank the attorney of Shaw, signed and acknowledged by Shaw under date of July 16, 1931. (Here is set forth the power of attorney wherein the Bank is authorized by Shaw, in his name and stead, “to conduct and carry on the business of executing and completing certain contracts,” which Shaw then held, “for the lathing and plastering of various buildings, including the IT. S. Post Offices and Court Rooms at Milwaukee, "Wisconsin, El Dorado, Arkansas, and Baltimore, Maryland”; also various other contracts theretofore" made by him and not yet completed; and the Bank is further authorized to execute and deliver in .Shaw’s name “all instruments in writing, necessary to the proper conducting of the business, as the Bank may deem necessary and expedient”; and it is further stated that the power of attorney, so given, is “to be irrevocable so long as there remains any indebtedness” from Shaw to the Bank.) And in the answer it is further alleged that “prior to the service of summons” upon the Sollitt Co., it “had paid to the Bank, by virtue of the assignment, all amounts then due under said contract, totaling $40,797.22,” and that the work has not yet been completed and that “there are now no funds owing to Shaw in the hands of defendant” (Sollitt Co.). And in the answer it is admitted that “the Bank claims that it is entitled to receive all funds due and to become due under the terms of said contract. ’ ’

In the answer of the Bank there are similar denials and allegations. And the Bank denied that any collusion between it and Shaw had been practiced, or that it was guilty of any fraud in procuring the assignment of Shaw’s subcontract to it; alleged that the moneys for labor and materials for the Milwaukee post office building “had been furnished by this defendant (the Bank), and that the amounts expended by it in the performance of said sub-contract are in excess of all amounts which have been or will be received by it on or because of the contract, and that it has suffered a loss in the performance of said sub-contract, so assigned to it. ’ ’ To this answer, and to the answer of the Sollitt Co., complainant filed replications.

On the hearings before the master, Rudolph F. Schmidt, president of complainant, testified in its behalf, and it called as witnesses Ralph D. Reser and Mark L. Thompson, residents of Lafayette, Indiana, and respectively the cashier and attorney at law for the Bank. Thompson gave further testimony as a witness for the Bank, and various documents, agreements and other writings were introduced in evidence. On the second hearing before the master it was stipulated and agreed that if George Sollitt were called as a witness he would testify in substance as follows:

That the Sollitt Co. entered into the subcontract with Shaw for Shaw’s doing the plastering, etc. work on the post office building at Milwaukee and at the contract price of $52,500; that certain extras and additions to the contract were made, making the total contract price, including extras, $59,000; that there has been paid on account of the contract and extras $49,039.50; that there remains due to various subcontractors the sum of $2,504.84; and that “the balance remaining in the hands of the Sollitt Co., as of this date (about October, 1932), is $7,555.66, which balance is claimed by the National Fowler Bank, by virtue of the assignment to it by Shaw.”

One of the contentions of appellants’ counsel, as a ground for the reversal of the decree, is that it does not conform to the theory of the bill as disclosed from its allegations. And counsel argue in substance that the bill (which was never amended) charges that because of the collusion and fraud of Shaw and the Bank, Shaw’s assignment of his subcontract to the Bank was void as to complainant, the judgment creditor of Shaw; that the decree discloses that the court granted relief to complainant on an entirely different theory (viz., that about the time the assignment was executed the Bank “promised and agreed with Shaw that it would pay and discharge the indebtedness owing by Shaw to complainant”); that there are no allegations in the bill charging that the Bank made any such promise or agreement with Shaw; that, furthermore, the bill does not pray for any specific relief against the Bank; and that, hence, the bill should have been dismissed. We are of the opinion that there is substantial merit in the contention and argument. In Howard v. Burns, 279 111. 256, 260, it is said: “The allegations of a bill, the proof and the decree must correspond, and relief cannot be given upon facts proved by the evidence where there are no averments in the bill to which the evidence can apply.” (See, also, Morgan v. Smith, 11 Ill. 194, 200; Bremer v. Calumet & Chicago Canal & Dock Co., 123 Ill. 104, 110; Leahy v. Nolan, 261 Ill. 219, 221, 222; Tucker v. Powell, 318 Ill. 166, 168.) In the Bremer case it is said: “Nothing is better settled than that proofs without allegations are just as unavailable as allegations without proofs.” And in the Tucker case it is said: “If the allegations in a bill are not established by the proof, or if the proof establishes a state of facts not alleged in the bill and no amendment of the bill to correspond with the proof is made, the chancellor cannot do otherwise than enter a decree dismissing the bill.” Furthermore, it is well settled that “the decree must conform to the prayer of the bill.” (Hall v. Towne, 45 Ill. 493, 495; Gage v. Curtis, 122 Ill. 520, 527; Warner v. Mettler, 260 Ill. 416, 422.)

And, in our opinion, there is merit in appellants’ counsels ’ contention, as a ground for a reversal of the decree, that it is well settled law that an assignment of the assets by an insolvent debtor to a bona fide creditor, as security for or in payment of said creditor’s claims is neither necessarily fraudulent nor void as to the debtor’s other creditors, even though the effect of said assignment be to hinder and delay said other creditors in the collection of their claims. (See First Nat. Bank of Peoria v. Rhea, 155 Ill. 434, 440; Walsh v. O’Neill, 192 Ill. 202, 205; Third Nat. Bank of Mt. Vernon v. Norris, 331 Ill. 230, 233, 234; Levy v. Weidhorn, 287 Fed. 754, 756, 757.) In the Norris case, it is said: ‘ ‘ The conveyance was a preference of the $10,000 debt over E. J. Norris’ other debts, but a debtor has a right to prefer one creditor, when he acts without fraud, even though he devotes all his property to the preferred creditor, leaving nothing for his other creditors to resort to. There must be evidence to show a fraudulent intent before a conveyance made upon a valuable consideration may be held fraudulent.” The evidence in the present case discloses in substance that at the time (May 27, 1931) when Shaw made the said assignment to the Bank, he was actually indebted to it for moneys loaned to him for the purpose of financing various construction projects in the sum of approximately $26,000, as evidenced by certain of his notes held by the,Bank, and that he was unable to pay the notes; that the assignment was made by Shaw and taken by the Bank, in good faith and without any intention of defrauding any of Shaw’s other creditors, as security for Shaw’s existing indebtedness to the Bank, and also as security for additional moneys that the Bank would expend in Shaw’s behalf in the carrying out of his subcontract on the Milwaukee post office job; and that about the time the assignment was made Schmidt, president of complainant, had'knowledge of its execution and purport. It amounted to a preference to the Bank over Shaw’s other creditors including complainant, and might have been set aside as such by proceedings in a bankruptcy court had complainant and some of Shaw’s other creditors seen fit in apt time to institute such proceedings, but the evidence does not disclose that any bankruptcy proceedings were instituted.

It is further contended by appellants’ counsel in substance that the court’s finding in the decree (viz., that about July 16, 1931, the Bank “promised and agreed with Shaw that it would pay and discharge the indebtedness owing from Shaw to complainant”) is contrary to the evidence, and that the decree, based upon such a finding, is also contrary to the evidence and should be reversed. We are of the opinion that there is merit in the contention. The evidence, pertinent to the contention, disclosed the following facts in substance: About July 16, 1931, Thompson (the lawyer and representative of the Bank), Schmidt (president of complainant), and Shaw had various conferences in Cincinnati, Ohio, concerning the condition of Shaw’s business affairs. Thompson was looking after the Bank’s interests and .Schmidt was attempting to have adjusted Shaw’s indebtedness to complainant, which is the indebtedness for which it subsequently obtained the judgment against Shaw. On July 16, 1931, Thompson gave to Shaw a letter, signed by the Bank, per himself (Exhibit 2-0), in which he recommended one of two alternatives that would have to be pursued by Shaw because of existing conditions, viz., (1) either assigning all of his contracts on various uncompleted jobs to the Bank, in order to secure it, he to be paid his expenses and a weekly salary by the Bank, etc., and the Bank to “make satisfactory arrangements” with complainant “to absorb and discharge” Shaw’s indebtedness to complainant, or (2) a receivership over Shaw’s business and assets. Apparently, Shaw accepted the first alternative and appropriate actions were taken. Apparently, also, Schmidt had voiced objections at the conferences to the Bank’s getting assignments of all of Shaw’s contracts unless some provisions were made for the payment or security of Shaw’s said indebtedness to complainant. Because of Schmidt’s objections, a written agreement, dated July 16, 1931, was drafted (Exhibit 6), and signed by complainant (per Schmidt) and the Bank (per Thompson). It is recited in the agreement that Shaw is indebted to complainant in the sum of $4,584, as evidenced by his note; that Shaw is indebted to the Bank in the sum of about $47,000; and that Shaw “has executed an assignment and a complete power of attorney” to the Bank “upon all the contracts now in existence.” It is then provided that complainant agrees to co-operate with and assist the Bank “in determining the advisability of proceeding on each of the contracts,” and to “assist, in an advisory capacity, in the execution of such contracts as may now be in process of execution,” and to “furnish such technical advice and supervision as is necessary or possible”; and that, in consideration thereof, the Bank “agrees to guarantee payment of such indebtedness as is evidenced by said note in full on or before date of final completion and termination of the said Shaw contracts.” But, on the face of the agreement it is further stated that it is “subject to the approval of the officers of the corporation” (i. e., the Bank). Shortly after the signing of the instrument at Cincinnati, Thompson and Schmidt went to Lafayette, Indiana, and interviewed the officers of the Bank, but they refused to approve the agreement or to sign it. There is no evidence that Thompson had authority, in signing the agreement, to bind the Bank by the terms thereof, without the affirmative approval of the Bank’s officers which was not obtained. Nor is there any evidence that complainant ever “co-operated” with the Bank as it agreed to do or that the parties ever acted as if the agreement was in force. Thereafter the Bank, by Shaw and other agents, continued to prosecute Shaw’s subcontract on the Milwaukee post office building to substantial completion and advanced additional moneys for the purpose. At the end it appeared that in the prosecution of said subcontract the Bank had expended, out of its funds, a total of approximately $66,000, — a sum in excess of the total amount, including extras, of the contract price.

And we find no merit in appellee’s counsels’ contention, as we understand it, that the decree may be sustained on the theory that the Bank, in taking the assignments and powers of attorney executed by Shaw and prosecuting and completing his Milwaukee subcontract, was guilty of ultra vires acts. We do not think that its acts can be considered as ultra vires the bank. (Roebling Sons Co. v. First Nat. Bank of Richmond, Va., 30 Fed. 744, 746; First Nat. Bank of Charlotte v. National Exchange Bank of Baltimore, 92 U. S. 122, 127; Paterson & Edey Lumber Co. v. Bank of Mobile, 203 Ala. 536, 540.)

Our conclusions are that the court erred in entering the decree appealed from and that the court should have dismissed complainant’s bill. Accordingly, the decree is reversed and the cause is remanded to the circuit court with directions to dismiss the bill for want of equity.

Reversed and remanded with directions.

Sullivan, P. J., and Scanlan, J., concur.


source: Caselaw Access Project

author: Mr. Justice Gridley

license: Public Domain

text:
    LeRoy Engles, Appellee, v. Sam Rosenthal and Ray Rosenthal, Appellants.
    Gen. No. 37,418.

      Opinion filed March 6, 1934.
    Heard in the second division of this court for the first district at the February term, 1934.
    Rehearing denied March 21, 1934.
    Shulman, Shulman & Abrams, for appellants; Meyer Abrams, of counsel.
    No appearance for appellee.
   Mr. Justice Gridley

delivered the opinion of the court.

This is an appeal by defendants, as appears from the appeal bond filed with and approved by the clerk of the superior court- of Cook county, from an interlocutory order of that court entered January 19, 1934, appointing William T. Donahue as receiver of the improved premises involved. The defendants are the owners of the equity of redemption. No appearance or brief has here been filed by complainant.

The sworn bill of complainant, as a successor trustee elected by a majority of the holders of bonds secured by the trust deed sought to be foreclosed, was filed on December 30, 1933, and after notice to defendants (who had entered their appearance), complainant moved for the appointment of a receiver pendente lite. In the court’s order, appealed from, it is recited that “the holders of the equity of redemption, together with all parties involved, have been duly served with notice of the motion” and that the court has read the sworn bill, and has “heard evidence as to the value of the property described in the trust deed.” And the court found inter alia that it was provided in the trust deed that, upon the filing of a bill to foreclose, a receiver with usual powers might be appointed for the premises; that the rents, issues and profits of the premises were pledged, as security for the payment of the indebtedness secured thereby, and were expressly conveyed and assigned to the trustee; that “it is necessary for the preservation of the premises that a receiver be appointed, — it appearing to the court that it is probable that there will be a deficiency after sale”; and that “the premises are scant security for the amount due.” And the court, after appointing Donahue as receiver until further order and setting forth his powers and duties, further adjudged that defendants, their agents, etc., and all other persons, firms and corporations, are enjoined “from interfering with, attaching, levying upon, or in any manner disturbing the property, including the rents, issues and profits arising therefrom over which said receiver is appointed as such, ... or from in any manner interfering with or preventing the discharge by the receiver of his duties as such.” On January 23,1934, defendants’ counsel moved the court, supporting the motion by a petition, that the order appointing the receiver “be vacated” and that defendants “be given leave to operate and manage the property under a surety bond in the sum of $2,000, or other sum that the court may suggest, and to account monthly, and to turn over the net income to the trustee for the payment of taxes, subject to the form of the order to be entered by the court.” After a hearing the motion was denied. The present appeal, solely from the order appointing the receiver, was perfected in this court by the filing of the clerk’s transcript of the record on January 29, 1934.

In our new Practice Act, in force January 1, 1934, section 78 thereof (Cahill’s St. 1933, ch. 110, Ü 206, p. 2160) relates to “Appeal from interlocutory orders concerning- injunctions and receivers. ’ ’ Its provisions are the same, with one exception, as those contained in section 123 of our former Practice Act, in force for many years. To the sentence, as contained in section 123, viz.: “The force and effect of such interlocutory order or decree and the proceedings in the court below shall not be stayed during the pendency of such appeal,” there are, in said section of the new act, added the words: “except upon order of the Appellate Court or a judge thereof in vacation.” On January 30, 1934 (one day after the transcript of the record was here filed and on the same day that defendants ’ abstract and printed brief were filed) defendants ’ counsel appeared and moved to “stay the force and effect of the interlocutory order appointing the receiver and issuing the temporary injunction, pending the disposition of this interlocutory appeal, upon the filing of a bond with proper surety to be approved by this court.” We denied the motion. Our reasons for the ruling are: (1) That in the statute, as amended, the provision still remains that the force and effect of the interlocutory order or decree appealed from “shall not be stayed during the pendency of such appeal,” but that a discretionary power is apparently given to this court, or to a judge thereof in vacation, to temporarily stay said order or decree, pending a full hearing as to its legality or rightfulness; (2) that such discretionary power should be sparingly exercised, especially as it is provided in the statute and by rules of this court that such full hearing shall be given “precedence of other cases” and an early hearing of such cases generally is had; (3) that such discretionary power should not be exercised upon a mere motion to stay, etc., even when accompanied by an offer to file a bond as in the present case, because there is no suggestion in the statute that a stay may be granted under such conditions; (4) that such discretionary power may only be granted in a case where it is clearly disclosed from the record that the trial court had erred in the entry of the order or decree, and that damage must result to the complaining party because of its entry before there can be a hearing on the merits of the appeal in usual course; and (5) that in the present case it was not sufficiently shown that such discretionary power should- be exercised.

In complainant’s bill there is set forth the execution and delivery on May 16, 1928, by Sam Rosenthal and wife and one Morris Sevin and wife, of certain bonds, aggregating $105,000, and due on May 16, 1934, and of the trust deed securing them running to the KasperAmerican State Bank, as trustee; that the interest on the bonds was at the rate of 5% per cent per annum, payable semiannually, on the 16th days of May and November of each year, as evidenced by coupons; that it was provided in the trust deed that in case of default for 30 days in making payment of any of the bonds, either of principal or interest, the whole of the principal sum should at once and without notice become due and payable at the option of the holder or holders of any of the unpaid bonds; that there were partial defaults in payments of the interest due on November 16, 1932, and May 16, 1933, and a total default in the payment of interest due on November 16, 1933; that on June 24, 1932, the trustee named in the trust deed, Kasper-American State Bank, became insolvent and closed its doors; that thereafter one Arthur H. Meyer was appointed receiver of the bank by the auditor of public accounts of Illinois, and the appointment was ratified by the superior court of Cook county; that on December 16, 1933, Meyer, as such receiver, caused the resignation of the bank, as trustee of the trust deed, to be executed and filed for record; that on the same day the holders of a majority of the bonds (no part of the principal of which had been paid), in accordance with power conferred in the trust deed, elected complainant as successor trustee, and he in writing duly accepted the trust; that Meyer, as such receiver of the bank, holds seven of the unpaid bonds aggregating $7,000; that because of the defaults in the payment of interest on the bonds, which have' continued for more than 30 days, Meyer has demanded that complainant, as successor trustee, institute proceedings to foreclose the trust deed; and that accordingly complainant, as such trustee, brings the present suit on behalf of every one of the holders of the bonds or unpaid interest coupons, etc. The bill further alleged in substance:

That Bosenthal and wife and Sevin and wife did not pay a balance due for the 1928 general taxes, levied against the premises, amounting to $1,514.30; nor the 1929 general taxes amounting to $3,508.92; nor the 1930 general taxes amounting to $3,828.97; nor the 1931 general taxes, amounting to $2,838.76; nor did anyone pay any part of said taxes for them; that certain objections as to the payment of the taxes are pending in the county court and undisposed of; that complainant has been compelled to advance various sums of money for costs, expenses, solicitor’s fees, etc., and will be compelled to pay out other necessary sums for payment of taxes on the premises and for other purposes, and for expenses to hereafter be incurred, etc.; and that said trust deed specifically pledges the rents, issues and profits of the premises, and provides for the appointment of a receiver, etc.

That the premises are located at the southwest corner of South Cicero avenue and Gladys avenue in Chicago, and are improved with a three-story and basement brick store and flat building; that complainant “is informed and believes, and therefore shows, that said property constitutes scant, meager and inadequate security for the indebtedness herein sought to be foreclosed”; that “the market value of the premises has materially decreased since the time when the trust deed was executed, and that, in complainant’s opinion, the market value does not now exceed the sum of $90,000, and is not sufficient to equal the amount óf the unpaid indebtedness due under the trust deed”; that in the event a foreclosure decree is entered and a sale is had pursuant thereto, “the moneys realized therefrom will be insufficient to pay in full the indebtedness secured by the trust deed, together with necessary costs,” etc.; that “unless a receiver is appointed complainant’s interests will be greatly injured and the value of his security further impaired and diminished”; and that “it is necessary for the protection of complainant that a receiver be appointed herein to take charge and possession of the mortgaged premises, and of the earnings, revenues, rents, issues and profits thereof. ’ ’

One of the contentions of counsel for defendants is that the allegations of the bill are insufficient to warrant the appointment of a receiver. While it is true that one of the important allegations of the bill as to the inadequacy of the security is, as counsel points out, made on “information and belief,” yet we are of the opinion that the allegations of the bill in their entirety warranted appointment of a receiver, pendente lite. And it appears from the order in question that before it was entered the court “heard evidence as to the value of the property,” and that from that evidence, together with the allegations of the bill, the court found that “it is necessary for the preservation of the premises that a receiver be appointed” and that “the premises are scant security for the amount due.”

And defendants have not seen fit to prepare and present a certificate of evidence as to what transpired on said hearing.

It is also contended that the granting of the interlocutory order for the injunction, as mentioned in the court’s order, was not justified because the bill did not contain any prayer for an injunction. A sufficient answer to this contention is that the present appeal is solely from the order appointing the receiver.

It is further contended that the order appointing the receiver “was arbitrary, an abuse of discretion and should be reversed,” because it appears “that complainant, as trustee, and defendants had in open court consented to permit the owners to remain in possession upon furnishing a surety bond to account for the income.” We find nothing in the present record that justifies counsels’ statement that complainant gave any such consent or made any such agreement.

Other contentions are made by counsel as grounds for a reversal of the order. We have considered them and find them to be without substantial merit.

The interlocutory order appealed from, appointing a receiver of the premises, should be affirmed and it is so ordered.

Afirmed.

Sullivan, P. J., and Scanlan, J., concur.


author: Mr. Justice Scanlan

text:
    John H. Taft, Defendant in Error, v. Otte & Company, Plaintiff in Error.
    Gen. No. 36,732.
    Opinion filed March 6, 1934.
    Heard in the second division of this court for the first district at the June term, 1933.
    Arthur J. Hughes, for plaintiff in error; R. A. Bullinger and Joseph A. Greaves, of counsel.
    Jaffe & Green, for defendant in error.
   Mr. Justice Scanlan

delivered the opinion of the court.

In a trial before the court plaintiff recovered a judgment for $2,000, which included $240 as plaintiff’s attorney’s fees.

Plaintiff’s statement of claim alleges that defendant sold him 20 shares of stock of the Bank of the United States, a corporation, for $1,760; “that the . . . stock was not at the times of the aforesaid sales, securities in Class ‘A’, Class ‘B’ or Class ‘C’, as described in an Act . . . known as ‘ The Illinois Securities Law’; . . . that the right to sell the aforesaid stock in the State of Illinois, was not granted to the Bank . . . or to any broker, or agent, on the aforesaid mentioned dates . . . ; that neither preceding the sale, or during the sale of said stock, did the Bank ... or the defendant secure any permit or license from the Secretary of State of Illinois, to sell the aforesaid stock in Illinois; . . . that the Bank ... is and was on the dates of the aforesaid sales, a foreign corporation existing and doing business under and by virtue of the laws of the State of New York, and that it had not on the dates of the aforesaid sales, nor at any time thereafter complied with the law regulating the admission of foreign corporations to transact business in Illinois, as required by the statutes; . . . that the sale of the stock by defendant to plaintiff . . . was and is utterly void; that ... by virtue of the Illinois Securities Law, plaintiff is entitled to have and receive from defendant the sum paid by him to defendant, to-wit: —$1,760, together with his reasonable attorneys fees, as provided for in Section 37, of the Illinois Securities Law. ...”

Defendant’s affidavit of merits denies that it contracted, sold and delivered to plaintiff the stock in question, “but alleges . . . that . . . defendant . . . as agent for . . . Taft, did purchase for the account of Taft and in Ms 'behalf certain shares of stock; . . . denies that plaintiff paid to defendant in payment of said stock the sum of $1,760, but alleges . . . that said sum was paid to defendant to reimburse defendant for moneys advanced and expended by defendant for and in behalf of Taft in connection with the purchase of the aforementioned securities; . . . denies that the aforesaid stock was not, at the times of the aforesaid sales, securities in ‘Class A,’ ‘Class B,’ or ‘ Class C, ’ . . . but alleges . . . that the stock was at the time of said alleged sales a ‘ Class A’ security by reason of the fact that subsection Two of Section Four of ‘The Illinois Securities Law,’ in so far as it pertains to ‘ State Banks or Trust Companies of tMs State ’ is unconstitutional and void, being discriminatory and creating a special privilege and immunity denied to this defendant. . . . ”

Defendant contends that the burden was upon plaintiff to prove by more than a preponderance of the evidence that the securities involved were Class “D” securities, “as alleged in plaintiff’s statement of claim,” and that plaintiff failed in that regard. Defendant argues that to establish that the securities came within Class “D” plaintiff was obliged to prove that the stock did not fall within Class “A,” “B” nor “C.” In support of tMs contention defendant cites People v. Revesz, 229 Ill. App. 616; Piot v. Chartrand, 237 Ill. App. 117; and Oppenheimer v. Peabody, Houghteling & Co., 270 Ill. App. 240.

The present Illinois Securities Law, enacted in 1919, is a substitute for a previous act, which it repealed. As stated in Stewart v. Brady, 300 Ill. 425, 434: “The clearly indicated purpose of the legislature was to protect the public from deceit and prevent fraud in the sale and disposition of stocks, bonds and other securities within the State.” In that case wall be found a very complete analysis of the four classes of securities, Class “A,” Class “B,” Class “C” and Class “D” created by the act.

In Trakas v. Cokins, 224 Ill. App. 327, the first division of this court passed upon a case where the sale occurred in February, 1918, and the claim was based upon section 20 of the old act, which provided: “Every sale or contract of sale in violation of sections 1 or 2 of this Act shall be void, and the dealer making such contract or sale must, on request and tender back of any securities received, return the purchase price or any part thereof paid.” Section 3 of that act (Call. 1920 Stat. ch. 32, p. 514) provided that the provisions of the act should not apply to the disposal of certain securities, enumerating them. Although said section 20 contained nó provision as to the burden of proof such as is found in subsection 2 of section 37 of the present act, hereinafter referred to, nevertheless, the reviewing court, after considering the purpose of the legislature in passing the act, held that “to place the burden upon the plaintiff of proving that the stock in question was not exempted under the act would have the effect of destroying the beneficial purpose intended by the legislature when it enacted the statute.” The opinion states: “We do not think that the law imposed upon the plaintiff the duty of proving that the stock in question did not come within the exemptions of section 3. If it does, then it may be quite impossible for the courts to enforce a remedy which the legislature appears to have intended by the enactment of section 20 of the Act. . . . Proof of the negative facts that the securities were not listed in a standard manual approved by the Secretary of the State, or that the current price of the stock sold had not been published in the market reports of a daily newspaper or had not been listed upon any organized stock exchange in the United States were facts which in their nature could not have been shown by the plaintiff. These facts rested peculiarly within the knowlege of the defendant and the law in such circumstances very wisely, and as an exception to the general rule, placed the burden of proving them upon the defendant.” The opinion in that important case was written by Mr. Presiding Justice Dever and concurred in by JJ. McSurely and Matchett.

As originally enacted, section 37 of the present Act (Hurd’s Ill. Rev. St. [1919] ch. 121a) provided: “Every sale and contract of sale made in violation of any of the provisions of this act shall be void and the seller of the securities so sold and each and every solicitor, agent or broker of or for such seller, who shall have knowingly performed any act or in any way furthered such sale, shall be jointly and severally liable upon tender to the seller or in court of the securities sold, to the purchaser for the amount paid, 'together with his reasonable attorney’s fees in any action brought to recover such amount.” It became evident, however, that if the ordinary rules as to the burden of proof were to govern an action brought under section 37 it would be practically impossible for a plaintiff to obtain relief, and to meet the situation the legislature, in 1921, amended the section by interpolating certain new clauses and by adding four new sections. As stated in Perkins v. Dole, 240 Ill. App. 20, 25-6: “The old section 37, as changed, became subsection 1 of the new section 37. The changes were as follows: After the words ‘shall be void,’ in the second line, the words ‘at the election of the purchaser’ were added; after the words ‘and the seller of the securities so sold,’ and before the words ‘and each and every solicitor, agent or broker of or for such seller,’ the words ‘the officers and directors of the seller’ were inserted; after the words ‘shall be jointly and severally liable’ were added the words ‘in an action at law or in equity.’ Otherwise old section 37 remained substantially the same. The added subsection 2 of section 37 provides: ‘In any action, civil or criminal, ivhere the seller or issuer relies for his defense upon any of the exemptions provided for in this Act, the burden of proof to establish such exemption shall be upon such issuer or seller.’ The added subsection 5 of section 37 provides: ‘In any prosecution, action, suit or proceeding before any of the several courts of this State based upon or arising out of or under the provisions of this Act, a certificate under the seal of State, duly signed by the Secretary of State, showing compliance or non-compliance with the provisions of the Illinois Securities Law, respecting the securities in question or respecting compliance or non-compliance with the provisions of the Act by any issuer, solicitor, agent, broker, dealer or owner, shall constitute prima facie evidence of such compliance or of such non-compliance with the provisions of this Act, as the case may be, and shall be admissible in evidence in any action at law or in equity to enforce the provisions of this Act.’ ” (Italics ours.)

As to the instant contention of defendant: The act provides (section 8) that all securities other than those falling within Class “A,” Class “B” and Class “C” shall be known as Class “D” securities, and it is the theory of defendant that in order for plaintiff to prove that the securities in question were Class “D” securities it was necessary for him to prove that they were not Class “A,” Class “B” nor Class “C” securities. This theory finds support in People v. Gillett, 243 Ill. App. 41, 51; Piot v. Chartrand, supra, and Oppenheimer v. Peabody, Houghteling, & Co., supra, and at first blush it seems to be sound. But after an examination of the pertinent parts of the act we have become convinced that it is unsound.

As to the cases cited by defendant: In People v. Revess, supra (decided by the third division of this court), the defendant was charged in an information with having unlawfully sold 410 shares of certain stock in violation of the Illinois Securities Act, and he entered a plea of not guilty to the information. The alleged sale was made more than 15 months before the enactment of the amendment to section 37, and from an inspection of the record and briefs we find that the case was tried upon the theory that it was governed by the, general rules applicable to criminal procedure. The jury were instructed that as it was not a civil case, the rule as to the preponderance of the evidence did not apply and that the burden was upon The People to establish by evidence beyond a reasonable doubt the existence of every element necessary to constitute the offense charged. No question was raised by the prosecuting attorney in the trial court, nor by the attorney general in this court, as to the correctness of the procedure followed. Piot v. Chartrand, supra, involved a civil proceeding under the act, and the court cites only the Revese case in support of its ruling that the burden rested upon the plaintiff “to prove by a preponderance of the evidence that this stock belonged to either class C or class D, as defined by the Securities Act.” In the Piot case the only plea filed was the general issue. This plea did not set up a good defense and it might have been stricken upon motion. (See Jochum v. Ross & Co., 345 Ill. 587.) In People v. Cillett, supra, also decided by the third division of this court, it was held (p. 51): “The burden was upon the People to prove beyond a reasonable doubt that they [the bonds in question] were not in either of those classes [Class “A,” “B” or “C”], and thereby establish that the securities in question belonged to Class ‘D’ as alleged in the information and having failed to make such proof, the judgment is erroneous. People v. Revesz, supra; Piot v. Chartrand, 237 Ill. App. 117.” In the Gillett case the information charged that the securities sold were Class “D” securities and the sole plea was not guilty. In Oppenheimer v. Peabody, Houghteling & Co., supra, decided by the first division of this court, the plaintiff alleged in Ms statement of claim that the bonds sold were not Class “A,” Class “B” nor Class “C” securities but were Class “D” securities. The defendant, in its affidavit of merits, denied that the bonds were Class “D” securities and alleged that at the time of the sale and exchange of the bonds they had been qualified for sale by the defendant under the Illinois Securities Lato as Glass “G” securities, and averred that the transaction was legal in every respect. The reviewing court held that, despite the defense interposed in the affidavit of merits, the burden was upon the plaintiff to prove that the securities in question were Class “D” securities, and cited People v. Revesz, supra; Piot v. Chartrand, supra, and People v. Gillett, supra, in support of its ruling. It thus appears that the Piot, Gillett and Oppenheimer cases are based upon the ruling in People v. Revese, and, as we have heretofore shown, that case had no bearing on the question determined in the Piot, Gillett and Oppenheimer cases.

In Dobal v. Guardian Finance Corp., 251 Ill. App. 220, 224, decided by the first division of this court, it was said: “Further, according to the provisions of paragraph 2 of section 37 of that act, Cahill’s St. ch. 32, H 290, subd. 2, the burden of proof is put upon the seller or issuer to establish exemption from the act if exemption is claimed.” JJ. McSurely and O’Con-nor concurred in the opinion, written hy Mr. Justice Matchett. In Abrams v. Love, 254 Ill. App. 428, 436, the Appellate Court of the second district held: “To place the burden upon the plaintiff of proving that the stock in question was not exempted under the act would have the effect of destroying the beneficial purpose intended by the legislature when it enacted the statute. ’ ’ After calling attention to the important fact that the act provides that “all securities other than those falling within classes ‘A,’ £B’ and £C,’ respectively, shall be known as securities in class £D,’ ” the court states that a burden practically impossible to carry would be placed upon the plaintiff if he were obliged to prove that the stock did not fall within Classes “A,” “B” and “C” in order to establish that it did fall within Class “D.” In the recent case of Hudson v. Silver, 273 Ill. App. 40, decided by the first division of this court, the court said: “The burden is upon the defendant in these cases to prove that the stock was qualified. Abrams v. Love, 254 Ill. App. 428,” but the opinion contains the further statement that “it seems to be conceded that the stock was not qualified and was Class ‘C.’ ”

In Jochum v. Ross & Co., supra, certain counts of the declaration charged, inter alia, that the provisions of section 20 of the Illinois Securities Law were not complied with in the sale of the promissory note by the defendant to the plaintiff. The defendant filed amended pleas, and an affidavit of merits. To quote from the opinion: “It further appears from such affidavit of merits that on March 9, 1925, the appellant caused an issue of $225,000 of the notes of the Hart Coal Corporation to be classified under section 7 of the Securities law as class ‘C’ securities and became authorized to sell them as such. The securities were sold soon thereafter by the appellant and on July 16, 1925, an affidavit showing that fact was filed with the Secretary of State, who delivered to the appellant a memorandum dated July 20, 1925, stating that the appellant had formally qualified said issue of notes under the Securities law and had submitted to the Secretary of State an affidavit averring that all of the notes had been sold, and that the Secretary of State therefore declared that the records respecting qualification under the Illinois Securities law of that issue of notes were thereby closed. Afterward, about March 21,1927, the appellant re-purchased the note involved in this case, and subsequently sold it, together with other securities, to the appellee in consideration of various other securities then sold and delivered by the appellee to the appellant and of $1864.47 in cash also paid to the appellant by the appellee.” In the trial court the case was decided upon the pleadings, the appellant’s amended pleas and affidavit of merits were stricken and judgment by default was rendered against it. The decision in the Supreme Court turned upon the sole question as to whether or not the amended pleas and affidavit of merits set up a good defense to plaintiff’s cause of action, and the court, after reviewing the requirements of section 20 and the facts set up in appellant’s amended pleas and affidavit of merits, held: “Appellant’s amended pleas and affidavit of merits having stated good defenses to the causes of action set forth in appellee’s declaration and affidavit of 'claim, the judgment of the circuit court is reversed and the cause remanded, with directions to vacate the order striking appellant’s amended pleas and affidavit of merits from the files and for other proceedings according to law. ’ ’ In that case the appellant contended that “section 20 did not require the filing of new or supplemental statements after the entire issue had been initially sold,” and in passing upon this contention the court said, inter alia: “If section 20 requires a supplemental statement to be made by the appellant . . . the judgment is right, for no such supplemental statement was made.” It would seem to follow from this decision that a defendant’s pleas and affidavit of merits must set up a good defense to the plaintiff’s cause of action, as alleged.

Subsection 2 of section 37 provides: “In any action, civil or criminal, where the seller or issuer relies for his defense upon any of the exemptions provided for in this Act, the burden of proof to establish such exemption, shall be upon such issuer or seller.” The legislature saw that the remedy given the purchaser under section 37 as originally enacted, was difficult, if not impossible, to enforce, and subsection 2 and subsection 5 were enacted to give vitality and effect to the remedy. Section 4 specifically provides that securities in Class “A” and sales of them are exempt from the provisions of the act, and section 5 provides that securities in Class “B” and sales of them, when disposed of by the persons and in the manner provided by that section, are also exempt from its provisions. The act provides that all securities in Class “C” and Class “D” are subject to the provisions of the act and can be sold only upon compliance with its terms. In Stewart v. Brady, supra, the court, in analyzing’ the various kinds of securities in Classes “A” and “B,” refers to them as “exemptions” from the applicability of the act. In People v. Love, 310 Ill. 558, the indictment charged the defendants with the sale of Class “D” securities without compliance with the Securities Act. Counsel for defendants there contended that securities which fall under Class “D” may be treated as under Class “B” where the circumstances of the sale are such as to come within some one provision of section 5 relating to sales of securities in Class “B,” and they argued that the indictment did not state a cause of action because it did not negative the exemptions enumerated in section 5 of the act. The court held that it was unnecessary to decide whether Class “D” securities may be exempt as under Class “B,” because the evidence did not show the sale to come within the provisions of paragraph 2 of section 5 of the act, but in passing upon the sufficiency of the indictment, the court said: “Nor is it necessary that the indictment negative the exemptions enumerated in section 5 of the statute. The offense lies in selling Class ‘D’ securities without full compliance with the Securities law. If there has not been a compliance with the law plaintiffs in error are guilty. If they did not make such sales, or in making them complied with the statute, such is a matter of defense which will defeat the action. The indictment is sufficient,”

It seems clear to us that the language used in subsection 2, viz., ‘ ‘ any of the exemptions provided for in this Act,” can relate to only the sales of securities in Class “A” and Class “B.” To show the uncertainty that follows a different interpretation: In Piot v. Chartrand, supra, Mr. Justice Higbee states (p. 120): “The word ‘exemption’ as used in the second paragraph of said section cannot apply to classes A and B stock as no restraints are placed upon the sale of the same by the law. But' there are certain conditions provided for by the Act under which securities of both classes C and D may be sold without violating the Act and these conditions constitute the exemptions referred to in the second paragraph of section 37.” As “securities in Class ‘C’ and Class ‘D’ are subject to the provisions of the act and can only be sold upon compliance with its terms” (Stewart v. Brady, supra, p. 430), this interpretation, in our judgment, is clearly wrong. In Oppenheimer v. Peabody, Houghteling & Co., supra, Mr. Justice O’Connor states: “We think that paragraph 2 of section 37, above quoted, does not place the burden upon the defendant to prove that the bonds in question belonged to any particular class of securities but applies to exemptions some of which are those mentioned in section 5 of the act. Piot v. Chartrand, 237 Ill. App. 117. Under section 5 it is provided that under certain conditions one may sell his own property for his own account; that capital stock of a corporation when sold to its stockholders without the payment of any expense or commissions to agents, solicitors or brokers, securities when sold by any bank or trust company, etc., securities when sold to any corporation or broker or dealer in securities, when securities are sold at judicial sale or by a receiver in bankruptcy at public auction, need not be qualified under the act. Section 5, it is true, refers specifically to Class B securities, and section 4 of the act, in defining Class A securities, among other things, defines one class of A securities as those listed and dealt in on the New York, Boston and Chicago exchanges; and it has been held that if in a particular case the defendant seeks to show that stocks were listed on such exchanges to escape liability, the burden is on the defendant to show that fact. Trakas v. Cokins, 224 Ill. App. 327. We think the foregoing are some of the exemptions referred to in paragraph 2 of section 37.” It will be noted that Mr. Justice O’Connor does not follow Mr. Justice Higbee’s interpretation of the subsection. Section 4 enumerates and defines all the securities exempt under Class “A,” and section 5 enumerates and defines all the securities exempt under Class “B.” Mr. Justice O’Connor concedes, apparently, that certain securities in Class “A” and Class “B” are “exemptions referred to in paragraph 2 of section 37.” We can find no warrant in the language of subsection 2 to justify a holding that the rule stated therein applies to certain securities sold under Class “A” and Class “B” but does not apply as to others. If such a holding be followed the determination of the securities to which the rule does and does not apply becomes, in our judgment, mere guesswork. As we have heretofore stated, in Trakas v. Cokins, supra, cited, apparently with approval, in the Oppenheimer case, the claim was based upon section 20 of the old act, now repealed, which contained no provision as to the burden of proof such as is found in subsection 2 of section 37 of the present act. Moreover, the court there held that the law did not impose upon the plaintiff “the duty of proving that the stock in question did not come within the exemptions of section 3,” and that section contained all of the exemptions under the old act. Nor is Piot v. Chartrand an authority in support of the statement that paragraph 2 “applies to exemptions, some of which are those mentioned in section 5 of the Act.”

Defendant states that plaintiff alleges in his statement of claim that the stock in question was not a Class “A,” Class “B” nor Class “C” stock, and contends that plaintiff has not proved this allegation by more than a preponderance of the evidence. The argument is, that having alleged that the stock was not a security in Class “A,” “B” nor “C,” it was necessary for plaintiff to prove that allegation. As we have heretofore stated, the act provides (section 8) that all securities other than those falling within Class “A,” “B” or “C” shall be known as Class “D” securities. An allegation that the stock was a Class “D” security would have been sufficient. (See People v. Love, supra.) Alleging that the stock was not a Class “A,” “B” nor “ C” security is but another way of alleging that it was a Class “D” security.

Section 37 was intended as something more than a right without a remedy, and if its plain meaning and purpose are not followed the remedy is practically destroyed. The law is a wholesome and necessary one. One who sells securities in this State is bound to know the nature of the same and that he is acting within the law when he sells them; and when his right to sell the securities is challenged he should have no trouble, if he has acted within the law, to justify the sale.

The correct procedure under section 37 is reasonably clear. As we have heretofore stated, a defendant, by his pleas and affidavit of merits, must set up a good defense to the plaintiff’s cause of action, as alleged. (See Jochum v. Ross & Co., supra.) If a defendant in his plea and affidavit of merits denies that he made the sale in question, then the burden is upon the plaintiff to prove that the defendant did make the sale. If the defendant admits the sale of a security in Class “C” or Class “D,” but avers that he complied with the statute, then subsection 5 of section 37 affords a simple and easy method of proving compliance or noncompliance, as the case may be, with the provisions of the act; but if a defendant “relies for his defense upon any of the exemptions provided for in this act” and alleges that the securities sold were exempt, under some paragraph of section 4 or section 5, then the burden is upon him “to establish such exemption.”

In the instant case, the affidavit of merits set up two defenses, 1, that the stock was “a ‘Class A’ security by reason of the fact that subsection Two of Section Four of ‘The Illinois Securities Law,’ in so far as it pertains to ‘ State Banks or Trust Companies of this State ’ is-unconstitutional and void, being discriminatory and creating a special privilege and immunity denied to this defendant,” and, 2, that in the transaction between plaintiff and defendant the latter was acting as agent for the former. At the outset of the trial counsel for defendant stated to the court that the first defense would not be urged, as the courts had held against it, and that “our chief defense, however, is that this was a sale through an agent.” The constitutional question is not urged here. In any event, “by bringing this case to this court, the appellant waived all questions as to the constitutionality of the act. (See Armour & Co. v. Industrial Board, 275 Ill. 328, 335.) ” (People ex rel. Nelson v. Citizens Trust & Savings Bank, 272 Ill. App. 444, 450.) The sole evidence presented by defendant relates to the second defense. Defendant’s theory of fact was that it did not sell to plaintiff the certificates of stock in question, that plaintiff asked defendant to purchase the stock for him, that it had no Bank of the United States stock in its possession at the time plaintiff requested it to purchase the stock, that it merely complied with plaintiff’s request to procure the stock for him and that it was acting as agent for plaintiff in securing the stock for him, and that under such a state of facts it was not liable to plaintiff under the act. - Plaintiff’s theory of fact was that defendant was a specialist in buying and selling bank stock, that it solicited him to make the purchase in question, and that the transaction constituted a sale by defendant to plaintiff. Neither at the close of plaintiff’s evidence nor at the close of all the evidence did defendant move for a verdict in its favor, but at the conclusion of the evidence it requested the court to hold, as a proposition of fact, the following: “(8) The defendant Otte & Co., a corporation, asks the court to find as a matter of fact that in the transactions between the defendant, Otte & Go., a corporation,' and the plaintiff, John H. Taft, on the fifth, sixth and seventh days of November, A. D. 1929, and in the transactions between the aforesaid parties on the twenty-first, twenty-second and twenty-sixth days of November, A. D. 1929, the defendant, Otte & Co., a corporation, acted for and in behalf of the plaintiff, John H. Taft, as his agent in negotiating the purchase of the shares of stock of the Bank of the United States on the above dates.” Defendant now contends that the trial court erred in refusing to hold the above proposition. It is a sufficient answer to this contention to say that after a careful examination of all the evidence bearing upon the above proposition we are satisfied that the action of the trial court was right. Plaintiff strenuously contends that even if it could be held, as a matter of fact, that defendant acted merely as plaintiff’s agent in the transaction, nevertheless, “under the provisions of the Illinois Securities Law, the defendant, having participated in the sale of an unqualified and non-exempt security either as agent, broker or dealer, is liable for the money paid to it by the plaintiff, and the trial court properly refused to hold defendant’s proposition of fact No. 8. Trakas v. Cokins, 224 Ill. App. 327, 330. Smith-Hurd’s Ill. Rev. Statutes, Chap. 121%, Sections 2, 3, 4, 5, 6, 7, 8, 29 and 37. People v. Curtis, 233 Ill. App. 13, 17, 18. People v. Gillett, 243 Ill. App. 41, 47. Kneeland v. Emerton, 183 N. E. 155, 159.” While there appears to be merit in plaintiff’s contention, it is unnecessary for us to pass upon the same.

By anything that we have said in this opinion we do not wish to he understood as intimating that subsection 2 does not apply in the trial of a criminal case. Nor have we found it necessary, in the determination of this writ of error, to pass upon the contention that the act is a penal statute and that plaintiff was therefore obliged to prove his case by more than a preponderance of the evidence.

Finding no merit in this writ of error, the judgment of the municipal court of Chicago will be affirmed.

Affirmed,.

Sullivan, P. J., and Gridley, J., concur.


text:
    Daniel D. Craft et al., Trading as Craft, McConaughy and Wolcott, Appellants, v. Carl Calmeyer and Julie Calmeyer, Appellees.
    Gen. No. 36,828.

      Opinion filed March 6, 1934.
    Heard in the second division of this court for the first district at the June term, 1933.
    William Rifkind, for appellants.
    No appearance for appellees.
   Mr. Justice Scanlan

delivered the opinion of the court.

This is an appeal from a judgment entered in the municipal court of Chicago, in favor of defendants, in an action of forcible detainer, tried by the court upon a stipulation of facts.

Defendants are in possession of the premises in question under a written contract, dated April 1, 1927, between Chicago Trust Company, trustee under trust No. 1477, seller, and Carl Calmeyer and Julie Calmeyer (defendants), purchasers. Plaintiffs are assignees of the contract. By its terms defendants agreed to pay the seller $9,000, as follows:

“$750.00 in cash at the time of the execution of this agreement, receipt whereof is hereby acknowledged; the assumption by the purchasers of a first mortgage now of record in the principal sum of $4500.00 aforesaid with interest at 6% per annum payable semiannually; the balance amounting to $3750.00 together with interest at the rate of 6% per annum payable monthly on the whole sum remaining from time to time unpaid to be paid as follows: $70.00 or more on the 1st day of April, A. D. 1927, and $70.00 or more on the first day of each and every month thereafter for a period of fifty-eight months, the balance of said $3750.00 then remaining unpaid to become due and payable on the 1st day of April, 1932; the monthly payments aforesaid as received shall be credited first to the interest accruing on the first mortgage and on said contract, and the balance, if any applied on the principal of said contract.”

The sale was subject to a first mortgage in the sum of $4,500. The seller “guarantees to give purchasers a trustee’s deed in joint tenancy when purchasers have paid the contract in full up to the first mortgage,” and agrees to convey the premises to the purchasers “in fee simple, not as tenants in common, but as joint tenants, clear of all encumbrances whatever, except as herein noted, by a good and sufficient conveyance.” The contract also provides that “the time of payment shall be of the essence of this contract” and that if defendants fail to perform any of the covenants “this contract shall, at the option of the seller, be forfeited and determined, and the purchaser shall forfeit all payments made on this contract, and such payments shall be retained by the seller in full satisfaction and in liquidation of all damages sustained.” On December 6, 1932, defendants had paid upon the contract $6,650.22, but only $2,287.75 of that amount had been applied on the principal and there was still due plaintiffs on account of the principal a balance of $2,212.25. It was further stipulated “that on or about June 7, 1932, an agreement was made between the defendants and plaintiffs whereby the plaintiffs would accept monthly payments of interest on the unpaid contract balance and on the first mortgage balances from the defendants and would carry them in default of principal payments if said interest was so paid and the defendants did thereafter on June 7, 1932, pay to the plaintiffs the sum of $31.44 . . . ; on July 6, 1932, . . . $31.44 . . .' ; on August 5, 1932, . . . $31.44 . . . ; on September 8, 1932, . . . $31.44 . . . ; on October 8, 1932, . . .. $31.44 . . . ; on November 8,

1932, . . . $31.44 . . . . ” The following is the receipt given to defendants for the June payment:

“Craft, McConaughy & Wolcott 40 North Dearborn Street Chicago, 111.
Franklin 1030 and 1031
Chicago, Jun 7 — 1932
M Carl Calmeyer 6747 — Oconto Ave.,
Chicago.
We beg to acknowledge receipt of your remittance covering the following items:
1684 Principal $ -
Apr. 1st Int. ‘Integeeé- 11.44
1st Mortgage Interest 20.00
$ 31.44
Previous Balance $ — Thanks,
This Payment — Craft,McConaughy & Wol-
cott,
Balance $ 2287.75 By M. P.”

The receipts given for the payments in July, August, September, October and November, 1932, are, in form and substance, practically the same as the above. It will be noted that the payments for October and November were made on the 8th. On December 6, 1932, plaintiffs sent defendant Carl Calmeyer a notice that there was then due upon the contract $476.61 (the amount of the total arrearage), and to “please remit at once and oblige.” This notice was a printed form, save as to the amount, and was not signed by plaintiffs. On January 19, 1933, plaintiffs served a written notice upon defendants that, “under the terms of the contractthey were in default in the sum of $546.61 and that unless that sum was paid “loithin ten days from this date; together with any additional indebtedness which may accrue within said ten days, under the terms of said contract, the said contract will be forfeited and determined and all payments heretofore made by the purchaser under the terms thereof will be retained as liquidated damages, and steps will be taken to recover possession of the said premises.” (Italics ours.) On January 30, 1933, plaintiffs served a “written notice,” consisting of one page, upon defendants. This notice states: “As you have defaulted in your payments for the months of Part of May, all June, July, August, Sept., Oct., Nov. & Dec. 1932 & Jan. 1933 under your contract ... we have elected to terminate said contract.” (Italics ours.) At this point in the notice there was stamped the following:

“At the expiration of 30 days from the date of this demand an action will be instituted in compliance with ‘An Act in regard to Forcible Entry and Detainer’ of the State of Illinois.”

Then follows a notification that the contract “has been forfeited and determined and that all payments heretofore made by you on said contract have been forfeited by your failure to continue said payments, (the last payment having been made by you on November 8, 1932 . . .).” Then follows:

“Demand for Immediate Possession
To Carl and Julie Calmeyer, 6747 Oconto Ave., Chicago, 111.
We Hereby Demand Immediate Possession of the following described premises: (Here follows description of the premises)
Dated this 30th day of January Craft, McConaught
1933 A. D., at Chicago, Illinois. & Wolcott
(Italics ours.) By Byland A. Wolcott”

The provisions of the Forcible Entry and Detainer Act (Cahill’s St. ch. 57, If if 2, 3) that control the instant appeal are:

“Par. 2. Action, when it lies.) Sec. 2. The person entitled to the possession of lands or tenements may be restored thereto in the manner hereafter provided:
í Í “Fifth — When a vendee, having obtained possession under a written or verbal agreement to purchase lands or tenements, and having failed to comply with his agreement, withholds possession thereof after demand in writing by the person entitled to such possession.
Í 6 “Par. 3. Demand — Service — Return — Form. Sec. 3. The demand required by the preceding section may be made by delivering a copy thereof to the tenant, or by leaving such a copy with some person above the age of twelve years, residing on, or being in charge of the premises; or in case no one is in the actual possession of the premises, then by posting the same on the premises, provided that in case there is a contract for the purchase of such lands or tenements, notice that a proceeding under the provisions of this Act is to he instituted shall he given to the purchaser under such contract at least thirty days prior to the institution of such proceeding, either hy notifying such purchaser personally of such fact or hy sending notice thereof hy registered mail to the last known address of such purchaser. ...” (The italicized part is the amendment of 1931.)

“The action of forcible entry and detainer, or forcible detainer, is a special statutory proceeding, summary in its nature and in derogation of the common law, and it follows that the conditions and requirements that the statute prescribes in conferring jurisdiction must clearly exist and that the mode of procedure provided by it must be strictly pursued. Steiner v. Priddy, 28 Ill. 179; Schaumtoeffel v. Belm, 77 id. 567; French v. Willer, 126 id. 611; Burns v. Nash, 23 Ill. App. 552.” (Fitzgerald v. Quinn, 165 Ill. 354, 360.)

In Wentworth v. Sankstone, 233 Ill. App. 48, 49-51, it is said:

“It has been repeatedly held that an action of forcible entry and detainer is a special statutory proceeding summary in its nature and in derogation of the common law. Wells v. Hogan, 1 Ill. (Breese) 337; French v. Willer, 126 Ill. 611; Fitzgerald v. Quinn, 165 Ill. 354.
“In the Wells case, which was an action of forcible detainer, the court said: ‘The proceedings . . . being summary, and contrary to the course of the common law, must strictly conform to the requisitions of the statute. ’
“In the French case, which was also an action of forcible entry and detainer, the court held that a confession of judgment, entered under the terms of a lease awarding possession of the premises to plaintiff, was unauthorized by - law and void. It was there said (p. 618): ‘This action is a special statutory proceeding, summary in its nature, and in derogation of the common law, and it is a rule of universal application in such actions, that the statute conferring jurisdiction must be strictly pursued in the method of procedure prescribed by it, or the jurisdiction will fail to attach, and the proceeding be coram non judice and void. . . .
“ ‘While forcible entry and detainer is a civil proceeding for restitution it is based upon, and has by modern legislation been evolved from the English forcible entry and detainer, which was a criminal proceeding merely. Ejectment, from its slow progress, was an inadequate remedy to a landlord, and the legislature provided the summary remedy by which a speedy recovery of-possession may be secured, but to prevent hasty action and to secure tenants and their families from the danger and inconvenience of being forcibly ejected without notice and reasonable time for preparation, certain safeguards were provided by the statute.’ It was further said (p. 621): ‘Such court of record does not proceed in forcible detainer by virtue of its power as a court of general jurisdiction, but derives its authority wholly from the statute, and in such proceeding is therefore to be treated as a court of special and limited jurisdiction.’ ”

In City of Chicago v. Steamship Lines, 328 Ill. 309, 315-6, it is said:

“The civil remedy in this State for the restitution of premises, based on forcible entry and detainer, was unknown to the common law and is purely statutory in its origin. While our statute on forcible entry and detainer contains some of the ideas found in the English statutes aforesaid, particularly the statutes of Henry VI, they do not embody all of the features of any of those statutes, and they cannot be said to be an adoption of any of them in their entirety or of any other English statute. It has been repeatedly decided by this court that an action of forcible entry and detainer is a special statutory proceeding summary in its nature and in derogation of the common law, and that our courts do not proceed thereon by virtue of their power as courts of general jurisdiction but derive their authority wholly from the statute, and in such a proceeding they are to be considered and treated as a court of special and limited jurisdiction. (French v. Willer, 126 Ill. 611; Wells v. Hogan, Breese, 337; Fitzgerald v. Quinn, 165 Ill. 354.) The action being a special statutory proceeding in derogation of the common law the statute must be strictly followed as to the remedy pursued(Italics ours.)

The only “demand in writing” for possession of the premises made by plaintiffs is the “Demand por Immediate Possession” contained in the “written notice” of January 30,1933. A plaintiff in a forcible detainer suit, because of the amendment of 1931, would not have, under any circumstances, a right of possession before the expiration of the 30 days, and, therefore, the demand for immediate possession would not be in compliance with the act, — in fact, it violates the purpose of it. “The statute must be strictly .followed as to the remedy pursued.” (City of Chicago v. Steamship Lines, supra, p. 316.) “The mode of procedure provided by it must be strictly pursued.” (Fitzgerald v. Quinn, supra, p. 360.) “The proceedings . . . must strictly conform to the requisitions of the statute.” (Wells v. Hogan, supra, p. 338.) “ ‘The statute conferring jurisdiction must be strictly pursued in the method of procedure prescribed by it, or the jurisdiction will fail to attach, and the proceeding be coram non judice and void.’ ” (French v. Wilier, supra, p. 618.) Had plaintiffs, in the “written notice” of January 30, made a demand for possession of the premises after the expiration of the 30 days, a different question might be presented.

But, in our judgment, the demand for possession was not “in strict compliance with the act” for another reason: The amendment of 1931 to section 3 provides that in a case like the present one it is necessary for the vendor to give notice to the vendee “that a proceeding under the provisions of this Act is to be instituted . . . prior to the institution of such proceeding,” and that such notice shall be given at least 30 days prior to the institution of such proceeding. Under the act (sec. 2, clause Fifth) the “demand in writing” for possession of the premises is an essential part of “such proceeding,” and without it there is no jurisdiction to hear a case brought under the act. In the instant case the written demand for possession was a part of the notice of January 30, 1933, but, in our judgment, the “demand in writing” required by clause Fifth could not, because of the amendment of 1931, be made until after the expiration of the 30 days’ notice required by section 3. In other words, the amendment stays any action or proceeding, under the act, until after the expiration of the 30 days ’ notice. The failure of plaintiffs to make the demapd in accordance with the act is fatal to their action. When it is remembered that the Forcible Entry and Detainer Act is summary in its nature and in derogation of the common law, it is no hardship to require a vendor who seeks its assistance to follow strictly the mode of procedure provided by it. If the courts did not insist upon a strict compliance with the statute great injustices to vendees would inevitably follow.. Undoubtedly, the legislature passed the amendment because of the great national depression, and the purpose of the same is obvious. The present case shows the wisdom and justice of the law.

It is stipulated that there had been a waiver of the payments as required by the contract. It further appears, from the agreed facts, that before the alleged forfeiture plaintiffs did not give reasonable notice to defendants of their intention to again resort to the strict terms of the contract. They thereby denied defendants a reasonable opportunity to pay what they owed under the terms of the contract, and the alleged forfeiture, under the facts and the law, was wholly unwarranted.

“Forfeitures are not regarded by courts with any special favor. The party who insists upon a forfeiture, must make clear proof, and show he is entitled to make such declaration. It is a harsh way of terminating contracts, and not infrequently works great hardships, ' and he who insists upon making such declaration, cannot complain if he is held to walk strictly within the limits of the authority which gives the right. ’ ’ (Palmer v. Ford, 70 Ill. 369, 377.)

It is the settled law of this State that an agreement that time should be of the essence of the contract may be waived or set aside by mutual consent or the conduct of the parties, or by consent or conduct of the party for whose benefit the stipulation is made, and that where the terms of the contract have been waived for a time, reasonable notice must be given of an intention to resort to its strict terms before a forfeiture may be declared. (See Plummer v. Worthington, 321 Ill. 450.) It is unnecessary to refer to the many other cases that might be cited in support of the above rule, as plaintiffs state in their brief: “The law is so well settled in this state that, where a purchaser of land under a contract for a deed containing a clause making time of payment of the essence of the contract is in default in the payments thereunder, and the vendor has not taken advantage of the terms of the contract and insisted upon strict compliance thereof, such vendor has lulled the purchaser into a sense of false security and before the vendor can take advantage of his option to cancel the contract and forfeit the payments made thereunder, he must reinstate the ‘time of the essence clause’ by a notice giving the purchaser a reasonable time to pay up his defaults.” But plaintiffs contend: “The question of the reasonableness of the time given the defendants to make good their defaults is not before the trial court. Neither is the question of the amounts the purchaser has paid under the contract. If the defendants feel that they were not given a reasonable time within which to make good their defaults, in the face of what is shown by their own Exhibits 1 and 7, or if they feel that they have paid a substantial amount under the contract, then their remedy is in equity for injunction. Strey v. Buehl, 265 Ill. App. 554, at page 557, and the Municipal Court has no right to consider such questions, since in a forcible entry and detainer proceeding, it has no equitable powers.” This contention is plainly an afterthought, and, under the record, cannot now be raised. The facts surrounding the waiver and the alleged forfeiture were stipulated, the evidence was admitted by agreement, and the instant point was not made, nor even suggested, to the trial court, and the case was tried upon the theory that the evidence in question was admissible and relevant. Moreover, no such point is covered by the assignment of errors. But the contention is untenable, even if it had been properly raised in the trial court. Under clause Fifth, in order to bring themselves within the act, plaintiffs had to prove that defendants had failed to comply with their agreement, and, under the facts and the law, in order to determine that question, it was necessary to consider and determine the further question as to whether plaintiffs had given defendants a reasonable notice of their “intention to resort to the strict terms of the contract” before forfeiting the same. Strey v. Buehl does not sustain the instant contention of plaintiffs, and it will be noted that there the defendants strenuously contended that the bill would not lie because complainants had “an adequate remedy at law by showing the facts set out in the bill of complaint and that these facts, if true, would constitute a defense” to the forcible detainer suit; and in their brief, filed in this court, defendants conceded that if complainants could prove in the forcible detainer suit “the same facts upon which this bill is predicated it would constitute a good defense.” Monson v. Bragdon, 159 Ill. 61, involved a bill for the specific performance of a contract and to enjoin an action of forcible entry and detainer and the question of forfeiture and reasonable notice was therein involved, and the court, in passing upon the contention that the complainant had a complete remedy at law, stated (p. 68) that complainant had a.complete remedy at law and that the facts surrounding the said question could have been interposed as a defense to the forcible entry and detainer suit, but that the defendant in the equity proceeding had not aptly interposed that defense to the bill. Questions of waiver and reasonable notice were adjudicated and decided in the following forcible detainer suits: Bernstein v. Weinstein, 220 Ill. App. 292; Donovan v. Murphy, 217 Ill. App. 31; Sixeas v. Fogel, 253 Ill. App. 579. Such questions are frequently determined in legal actions other than forcible detainer. To cite a few cases: Vider v. Ferguson, 88 Ill. App. 136; Hibernian Banking Ass’n v. Bell & Zoller Coal Co., 181 Ill. App. 581; Jakes v. North American Union, 186 Ill. App. 1.

The facts in this case show that the unfortunate defendants had paid upon the contract, in principal and interest, $6,650.22; that in a time of great national distress, when it was practically impossible for anyone, involved in a contract like the instant one, to obtain aid, plaintiffs waived strict compliance with the terms of the contract, “lulled the defendants into a sense of false security, ’ ’ and then suddenly notified them that under the strict terms of the contract they were in default in the sum of $546.61, and that unless the same was paid “within ten days from this date; together with any additional indebtedness which may accrue within said ten days, under the terms of said contract, the said contract will be forfeited and determined and all payments heretofore made by the purchaser under the terms thereof will be retained as liquidated damages, and steps will be taken to recover possession of the said premises,” and 10 days later they notified defendants that the contract “has been forfeited and determined and that all payments heretofore made by you on said contract have been forfeited by your failure to continue said payments.” The conduct of plaintiffs shocks our sense of justice, and we cannot escape the conclusion that in their method of procedure they were actuated solely by a desire to obtain possession of the premises and to destroy the equity of defendants in the same, regardless of the rights of the latter. Under the facts of this case 10 days ’ notice was so insufficient that even plaintiffs, in this court, do not attempt to defend their action in that regard, but they content themselves with the argument that such questions cannot be considered in a forcible detainer action. What is a reasonable notice depends largely upon the facts and circumstances of the particular case. In the instant proceeding the trial court, in passing upon the question as to whether the 10 days’ notice was a reasonable one, had the right to consider the size of the payments that had been made by defendants upon the contract, and the fact of the great depression, together with the other facts and circumstances bearing upon the question.

The judgment of the municipal court of Chicago is a just one and it should be and it is affirmed.

Affirmed.

Sullivan, P. J., and Gridley, J., concur.