text:
    N. K. Fairbanks, Executor, v. The Merchants National Bank of Chicago.

      Pledge of Stock as Security—Dividend—Rights of Pledgee—Renewal of Notes— Pay men t—Aeq uiescence.

    1. There can be no acquiescence without notice, either actual or constructive.
    2. A pledgee is entitled to collect dividends on stock held by him. Where such dividends are collected by the pledgor, be holds them as trustee for the pledgee, to whom he must account. This rule applies to an issue of new stock in the nature of a stock dividend.
    3. The mere change of the form of an indebtedness, collaterally secured, does not release the security, unless such is the intention of the parties.

      4. Upon a bill filed by the pledgee of stock of a corporation to secure the benefit of certain dividends, including certain new stock, it is held: That the stock was not the property of the wife of the pledgor; that the renewal of the loan from time to time did not release the security; and that the pledgee did not acquiesce in the collection of the dividends by the wife of the pledgor.
    [Opinion filed January 16, 1889.]
    Appeal from the Circuit Court of Cook County; the Hon. Lorin C. Collins, Judge, presiding.
    Messrs. Gregory, Booth & Harlan, for appellant.
    Where the property of one person is pledged for the debt of another, such property will stand in the position of a surety for the debtor; and any change in the contract or suretyship which would discharge a surety, will release and discharge the property so held as collateral. Price v. Reed, 15 N. E. Rep. (Ill.) 754.
    This case makes it very difficult to sustain the decree of the court below, assuming, as can be demonstrated, that the bank is chargeable with notice of Mrs. Peck’s ownership of this stock.
    Nothing can be plainer than that, if she had signed a note as surety for her husband which had been canceled and surrendered to him upon the giving of a new note, without her signature, or had at the time of payment of such original note been extended, upon consideration, without her consent, her liability would be ended. Nor if her husband expressly assented to such extension for her, would such assent bind her, without proof of his authority to act for her in this matter.
    The authority of a husband to act for his wife is to be determined from the evidence, like the authority of any other agent, and persons dealing with him must take notice of its limitations. Walker v. Coleman, 81 Ill. 390; Bernstein v. Bernstein, 11 Ill. App. 238.
    Taking the law, then, as laid down by the Supreme Court, the bank bad, by repeated extensions, lost all lien on the stock in question long before May 14, 1883, when the last note of Peck was given. If he th'en re pledged it, there mast be some evidence of his authority to do so. Of this there is no proof, nor, indeed, was there any attempt at a repledge further than the execution of a new note. In this, as in other respects, the case is quite analogous to Price v. Reed, supra.

    Kor is this in any wise-a question of intention, so far as the bank or its officers are concerned. When a creditor extends time of payment of an indebtedness on which a surety is liable, he never intends to discharge his liability; nor is any inquiry as to his intention in this regard supposed to be in the least material or relevant.
    The liability of a" surety is said to be sir iotissimi juris, or at least of strict law. It has certain well defined limitations, and terminates absolutely upon certain contingencies, without any reference to the intention of the parties or what may seem to be equities existing between them.
    Hor is it necessary to show that injury has resulted to a surety claiming exoneration under the law through that which by law terminates his liability. It is sufficient to say that this is the law. This is elemental, and requires no authority for its support, but cases can be readily cited which so hold. Cooper v. People, 85 Ill. 417; Phillips v. Singer Mfg. Co., 88 Ill. 305; Burgett v. Paxton, 15 Ill. App. 379, and cases cited.
    This being the law, its applicability to this case is apparent, if the bank is chargeable with knowledge of Mrs. Peck’s ownership of the stock. She held the legal title to these certificates. Kellogg v. Stockwell, 75 Ill. 68.
    The agreement was that the stock should be pledged to secure, not the payment of the old note, but the new; not any indefinite debt, but the particular sum, varying in almost every instance, for which the new note was given. What was it that was pledged? The stock as it stood at the time of the pledge; not all the dividends that had been earned and collected on it in the past. It has been distinctly held by this court, in a case very similar in its essential facts to this case, that a note thus taken up is so far paid as to release securities pledged for its payment. Fridley v. Bowen, 5 Ill. App. 198.

      In this case there are many authorities cited which establish the general proposition that the giving of a new note and surrender of an older note to the maker raise a presumption that the latter is paid. It seems quite doubtful whether this is a case of which a court of equity ought to take any cognizance. An action for money had and received would reach any dividends to which appellee might be entitled, and as to the other feature of the bill, a suit to compel a transfer of stock will not ordinarily lie where such stock is commonly bought and sold in the market. This objection may be taken after hearing. Lacombe v. Forstall’s Sons, 123 U. S. 562-70; Walker v. Kinzie, 18 Ill. App. 326; U. S. Ins. Co. v. Central Bank, 7 Ill. App. 426.
    Messrs. Wilson & Moore, for appellee.
    The holder of certificates of stock as collateral security, receiving the same indorsed with a power of attorney in blank, is entitled, upon notice to the company, to collect the dividends accruing upon such stock while such certificates remain in his possession; nor is transfer upon the books of the company material as to this right.
    The title to such dividends is in the pledgee, the increase of such property going with the debt. The pledgee, indeed, is the owner, and his special ownership imposes upon him the duty of a trustee; as such he is bound to collect the dividends, and may sue in his own name. Where dividends are collected by a pledgor, an action for money had and received for his use may be brought by the pledgee, where the latter has received the certificates of stock so as to vest the legal title in him. Colebroobc on Collateral Securities, Sec. 280, and authorities cited.
    Dividends declared during the continuance of the pledge belong to the pledgee, even though the latter is not registered as the owner on the corporate books; the pledgee is entitled to the dividends on the stock, but must account for them when the pledge is redeemed. Cook on Stock and Stockholders, Sec. 468, and authorities cited.
    In the Merchants National Bank v. Richards, 6 Mo. App. 454, the Merchants National Bank was the pledgee of certificates of stock for a debt owing by Ray & Co., having.received the same as pledgee on former loans. Richards was an attaching creditor who attached after notice to the company of the rights of the bank. On an interpleader it was claimed by Richards that the bank had no right to dividends, for the reason that the pledgee was not the owner, and the further reason that no transfer of the stock had been made on the company’s books. It was there held that the pledgee was the owner and entitled to dividends declared while the stock was held in pledge. A decision in favor of the bank in the lower court was affirmed in this court. This case on appeal to the Supreme Court of Missouri was affirmed. See same case, 74 Mo. 77.
    In Gaty v. Holliday, 8 Mo. App. 168, Gaty held certificates of stock as pledgee, and sold the stock for less than his debt; dividends accruing while he held it were paid by the company to the administrator of the pledgor who had distributed it as assets. Gaty sued the administrator for the same and recovered. On appeal it was held by the court that as pledgee he had a right, and it was his duty to collect dividends declared while he held the stock, and it made no difference that the stock was not transferred to him on the company’s books. “The whole present interest belongs to the pledgee.”
    In Hill v. Newichawanich Co., 48 How. Practice Rep., 427, where stock was held by the pledgee to secure a loan, the certificates in blank having been delivered to the lender, it was held that the pledgee is the legal owner of the stock and entitled to the dividends declared while he holds the same, although no transfer is made on the company’s books.
    In Herrmann v. Maxwell, 47 N. Y. Superior Court Rep. 349, two certificates of stock issued to A, by him indorsed in Vank, were pledged by B, who held the certificates, to secure a loan of money from C, and 0 receives the certificates in the same form. Ho transfer is made on the boobs and B collects dividends. The court say, “It is elementary law that the increase of the thing pledged is pledged with it,” and that B held the dividends collected as trustee for C, to whom they belonged.

      In McNeill v. Tenth National Bank, 46 N. Y. 331, and Leitch v. Welles, 48 N. Y. 601, it was decided that the requirement in the company’s by-laws that the stock be transferred on its books was for its own protection only, and in no way affects the rights of the pledgee to a recovery of dividends.
    It follows from the foregoing, that as to the dividends declared and paid after the 100 shares of stock were in the hands of the bank as collateral, the right to such dividends belonged to the bank so far as necessary to pay their loans.
    The same rule which applies to dividends applies also with equal force, and for precisely the same reasons, to the increased stock. Sarah T. Peck could have had no right whatever to the increased stock, either as a matter of law or under a resolution of the company, except as the owner and holder of the original shares. As a matter of fact .she was not at that time or at either of those times the owner or holder of these 100 shares; nevertheless she got the certificates, and at least ninety-nine shares thereof are still in the hands of her executor standing on the books in her name.
    In Eidman v. Bowman, 58 Ill. 444, where a bank had been organized with a capital of §100,000, with power to increase it to §500,000, the capital was increased to §20,000, which was subscribed for without the knowledge of the shareholders and without their having an opportunity to take their proper proportion. A bill was filed to restrain the issue of the certificates, and the court held that the right to the new stock when increased “ vested in the original stockholders proportionately, and belonged to them precisely like the old shares, except that it was not paid for; ” citing. Gray v. Portland Bank, 3 Mass. 365.
    In Atkins v. Albree, 12 Allen, 360, a testator had given a trustee shares of stock to pay the income to his widow, and at her death the shares to another. The company increased its capital and the trustee took a part of the new stock and the rest was permitted to be sold; the'proceeds were claimed by the widow as part of the income and by the remainderman as capital. It was held by the court that “ The right to subscribe for the new stock is only an incident or attribute of the original shares and not income. ” The proceeds, therefore, were to be retained by the trustee as part of the capital, to accompany the original shares.
    The question, to be determined in the case last cited was somewhat different from the present, but the principle involved was precisely identical, and the rule adopted there with reference to the character of the new stock when issued is the rule which must be applied in this case. The same was adopted by our Supreme Court in Eidman v. Bowman, supra, viz.: that the right to take the new shares belongs to and pertains to the ownership of the original shares. The authorities above cited establish conclusively that the whole present title and ownership in the original 100 shares belonged to the Merchants National Bank; necessarily, therefore, the right to take the new shares also belonged to the bank.
    No claim has ever been made in this case that any act of the bank amounted to a release or discharge of an existing security; it was simply argued that each renewal was a payment, by which the bank lost all claim upon the ■ stock; that each new note was a new pledge, and the bank took the stock each time as it then was, with no right whatever in precedent dividends. It will be seen that the whole argument hangs on the theory that a renewal was absolute payment, not only of the preceding “ note,” but of the “ debt.”
    The question is exactly the same as if the security were a mortgage or trust deed instead of personal property in pledge, and the cases have arisen chiefly with reference to this sort of security. The following decisions in Illinois conclusively settle the question in favor of the bank, as we contend: Flower v. Ellwood, 66 Ill. 446; Darst v. Bates, 51 Ill. 444; Rogers v. Trustees of Schools, 46 Ill. 448; Worcester National Bank v. Cheeny, 87 Ill. 614; Citizens National Bank v. Dayton, 116 Ill. 263.
   Garnett, P. J.

By its bill in this case appellee sought to secure the benefit of certain dividends on one hundred shares of the capital stock of the Chicago City Railway Company, (originally issued to Sarah T. Peek) and. of another one hundred shares which she, by reason of the first one hundred shares standing in her name on the books of the company, was permitted to subscribe for.

The first one hundred shares were given by Sarah T. Peck to her husband, John T. Peck, and by her indorsed and delivered to him. He pledged it to appellee to secure his individual indebtedness and other indebtedness of the firm of Peck & Bausher, of which he was a member. After the pledge was made, no transfer on the books of the company having taken place, his wife continued to draw the dividends until June 19, 1883. While the stock was thus held in pledge the railway company twice increased the amount of its capital stock, and permitted the stockholders to subscribe for the new stock by paying only a fraction of its value. On these terms Mrs. Peck subscribed for additional shares of stock, of which her estate still holds ninety-nine shares which were issued by reason of her name appearing on the boobs of the company as the owner of the one hundred shares pledged to appellee.

The court below found the bank was entitled to the benefit of the dividends collected by Mrs. Peck, and to the ninety-nine shares of new stock, upon payment to the executor of the amount which she paid for the new stock.

Appellant makes several objections to the decree.

1. It is urged that the stock was Mrs. Peck’s property, standing merely as a surety for the debts, and was released upon the renewal of the notes by the bank. This point would be sound if the stock really belonged to Mrs. Peck, and the bank had notice of her title (Price v. Reed, 15 N. E. Rep., 745) but her answer states that she gave the stock to her husband in consideration of certain real estate which he conveyed to her. That must be accepted as conclusive on the question of title.

2. The renewal of the loans from time to time, appellant contends, were, in law, payments, and the stock, without any right to previously accrued dividends, was left as security for each note as though it were a fresh transaction. To support this point appellant relies on Fridley v. Bowen, 5 Ill App. 191. In that case, however, the lender made no renewals, but at each maturity of.the loans new loans were made, and the old notes were paid out of the proceeds of the new loans* the creditor treating each transaction as a new discount. The court there said that each successive discount was a new loan, constituting a new indebtedness, wholly separate and distinct from the former. But here the evidence shows thatthe original indebtedness was continued, although represented at successive dates by new notes. A mere change in the form of the indebtedness or renewal of the note representing the same does not release the security, unless such was the intention of the parties: Rogers v. School Trustees, 46 Ill. 432; Citizens National Bank v. Dayton, 116 Ill. 257; Flower v. Ellwood, 66 Ill. 438.

3. There was no satisfactory proof that the bank acquiesced in the collection of the dividends by Mrs. Peck, nor can it be plausibly claimed that she received the new stock by the tacit consent of appellee. There can be no acquiescence without knowledge, either actual or constructive. The bank had no notice that she was receiving the- dividends, or in fact that there were any dividends, and so far as the new stock is concerned the bank had no notice of any intention to issue it until after it was issued.

“A pledgee is entitled to collect a cash dividend upon stock, and to bold it as he holds the stock itself. If he omits to obtain a transfer upon the books of the corporation, the corporation is of course justified in paying the dividends to the pledgor; but he is a trustee of the pledgee therefor, and must account to him.” Jones on Pledges, Sec. 398.

That the same rule applies to the issue of new stock at less than its value, when the same is issued as a privilege to the then stockholders, is manifest. One receiving stock under such circumstances, impliedly represents to the corporation that he is a stockholder. If he has in fact parted with his title, no wrong is inflicted on him by a decree that he shall surrender the new stock to the person to whom the original stock has been assigned.

This disposes of all the points that we think require attention. The record is free from error and the decree is affirmed.

Decree affirmed.


source: Caselaw Access Project

author: Garnett, P. J.

license: Public Domain

text:
    George H. Smith v. Cyrus P. Luse.

      Compound, Interest—Former Adjudication.

    1. In an action on a note it is error to compute interest on unpaid interest.
    2. In such an action a judgment in a former suit between the parties on the same note is conclusive of all material questions then involved.
    [Opinion filed January 16, 1889.]
    Appeal from the Circuit Court of Cook County; the Hon. Richard S. Tuthill, Judge, presiding.
    By deed dated November 3, 1875, appellee conveyed to appellant lot 13 in block 1 of Keeney & Rinn’s addition to Evanston, in Cook county, Illinois, subject to an incumbrance of §1,400 then outstanding thereon, represented by a note dated March 28, 1874, payable five years after date, bearing interest at eight per cent, per annum until maturity and ten per cent, thereafter, and to another incumbrance of §1,000. In the deed to appellant there was the following recital, viz: “ The party of the second part assumes interest on the above incumbrances from November 3, 1875.” The note for §1,400 was secured by trust deed to' H. A. Warren, and by virtue of the power to' him granted he sold the premises in April, 1878, for §500, to Eleonora Hunt. In March, 1884, Luse brought suit in the Supreme Court for the use of Eleonora Hunt to recover of the appellant the unpaid interest on said note for §1,400, and appellant having appeared in said suit, on April 12, 1884, judgment therein was duly rendered against him for $655.44, which included interest then due which had accrued before and after the maturity of the note. This present suit ms brought by Luse, for the use of said Hunt, to recover the interest on said §1,400 note accruing since April 12, 1884. Judgment was given for the plaintiff, and the defendant appeals.
    Messrs. Sawin & Varderploeg, for appellant.
    Mr. Matthew P. Brady, for appellee.
   Garnett, P. J.

It is admitted by appellee that the judgment appealed from included interest on interest. To compute interest upon interest after its maturity has, by all courts, whether exercising equity or common law jurisdiction, been held to be compound interest, and in violation of law. This question is one that has been frequently presented, and it is believed as uniformly held to be unauthorized. We are not aware of any well considered case which has held that there is an implied legal or moral obligation to pay interest upon unpaid interest after its maturity. Leonard v. Villars, 23 Ill. 377.

A different question arises when the interest is represented by coupons. Harper v. Ely, 70 Ill. 582; Humphreys v. Morton, 100 Ill. 592. All other material questions in the case must be considered as set at rest by the judgment in April, 1884, in favor of appellee and against appellant. Harmon v. Auditor, 123 Ill. 122; Freeman on Judgments, 253.

For the error in computing interest on interest, the judgment is reversed and the cause remanded.

Reversed and remanded.


author: Moran, J.

text:
    James McFarland, Impleaded, etc. v. Abram Claypool.

      Practice—Motion to File Amended Plea—Presumption—Attachment.

    It will be presumed that the court Üélow properly overruled a motion for leave to file an amended plea, where no such plea appears in the bill of exceptions and there is no statement in the record that it was prepared and ready to file.
    [Opinion filed January 16, 1889.]
    In error to the Superior Court of Cook County; the lion. Joseph E. Gary, Judge, presiding.
    Mr. James Frake, for plaintiff in error.
    Messrs. Cratty Bros. & Ashcraft, for defendant in error.
   Moran, J.

An attachment was issued against plaintiff in error upon an affidavit filed January 8, 1887, in which it was stated that he, the said James S. McFarland, conceals himself or stands in defiance of an officer so that process can not be served upon him, and has, within two years last past, fraudulently conveyed or assigned his effects, or part thereof, so as to hinder and delay his creditors, and has, within two years last past, fraudulently concealed Or disposed of his property so as to hinder and delay his creditors, and is about to fraudulently conceal, assign or otherwise dispose of his property or effects so as to hinder or delay his creditors.”

On the 8th of February, plaintiff in error filed in said attachment suit a plea in abatement of the attachment, duly sworn to by him, in which he prayed judgment of the writ, and traversed the allegations of the attachment affidavit in the following words:

“ Because he says that he did not conceal himself and did not stand in defiance of an officer so that process could not be served upon him; that he has not within two years last past fraudulently conveyed or assigned his effects, or a part thereof, so as to hinder and delay his creditors ; has not within two years last past fraudulently concealed or disposed of his property, so as to hinder and delay his creditors, and was not about fraudulently to conceal, assign or otherwise to dispose of his propertv or effects so as to hinder and delay his creditors.”

To this, defendant in error demurred, and the court sustained the demurrer. Thereupon a motion was made in behalf of plaintiff in error, by his attorney, for leave to file an amended plea in abatement, and, on the court requiring it, an affidavit was filed by the attorney in support of. the notice to file such plea.

The affidavit shows that' the client had stated to the attorney facts which, if they had been set out in the plea, would have constituted a sufficient traverse to the attachment affidavit ; that the plea was in fact drawn by the attorney’s clerk and" the attorney supposed it had been properly drawn; that he was taken by surprise by the action of the court in sustaining the demurrer; that if he had anticipated such ruling he would have liad his client present, who was absent in Denver, Colorado. The court denied leave to file an amended plea, and there was judgment against the plaintiff in error.

It is very clear that the plea filed was no sufficient traverse of the attachment affidavit, and demurrer thereto was properly sustained. The alleged error of the court in refusing leave to file an amended plea is not presented by the record. Do amended plea is set out in the bill of exceptions, and there is no statement in the record that such plea was prepared and ready to file. The statement of counsel in his brief that lie had a plea ready to file, could we regard such statement as supplying the record in that respect, would not aid plaintiff in error, for the plea is not set out; and before ,we can pass upon the question whether the court erred in refusing leave to file a plea, we must see what the plea sought to be filed was. Fadner v. Filer, 27 Ill. App. 506, at this term. The error which counsel has pressed for reversal in his brief does not arise on the record which he presents in such manner as to be available to plaintiff in error.

The judgment of the Superior Court must therefore be affirmed.

Judgment affirmed.

Cary, J., takes no part in the decision of this Case.


text:
    Nathan Davis v. Norman T. Gassette.

      Brokers—Exchange of Beal Property—Commissions—Abandonment.

    1. A real estate broker, to be entitled to commissions for effecting a sale, must show that he has produced a purchaser ready and willing to take the property on the terms specified, or that his efforts were the procuring cause of a sale made by the principal.
    2. The fact that an exchange of property, is finally effected through the efforts of the principal and another broker with a person to whom the first broker has tried to effect a sale without success, furnishes no basis for a claim for commissions by the first broker, especially i£ he has long since abandoned his efforts to sell the property.
    3. Merely advising the consummation of an exchange of property does not entitle the broker to a commission, unless such advice so contributed to the result as to be fairly regarded as the procuring cause of the transaction.
    [Opinion filed January 16, 1889.]
    Appeal from the Circuit Court of Cook County; the Hon. Bichard W. Clifford, Judge, presiding.
    Messrs. Swift & Campbell, for appellant.
    Messrs. Millard & Smith, for appellee.
    There is no pretense oE fraud or misrepresentation, or negligence on the part of appellee. The change of terms was not produced by any negligence of appellee or by his agency, “but by negotiations to which appellant was an immediate and principal party, and was by him freely consented to.” Davis might have insisted upon a sale of his property for cash, or upon such terms for the payment of money as he may have given to appellee, his broker, and compelled its payment, or refused to sell or trade, and thus he might have clearly avoided all liability for commissions. He freely consented, however, at the instance of Pardridge, to take Pardridge’s property in lieu of money for his property, and completed the sale. Mr. Gassette thereupon became entitled to bis commissions.

      The commissions of a broker for the sale of real estate are due when he has found a purchaser who buys the property, and his right to such commissions is not affected by a modification or change of the terms of payment made between the buyer and seller, different from the terms first given by the seller to the broker. Lawrence v. Atwood, 1 Ill. App. 217.
    “ Brokers are persons whose business it is to bring buyer and seller together. They need have nothing to do with the-negotiation of the bargain.” Inslee v. Jones, Brightly’s N. P. Rep. 76; Weatherall v. Latner, 21 Barb. 145.

      “ A broker becomes entitled to his commissions whenever he procures for his principal a party with whom he is satisfied, and who actually contracts for the purchase of the property at a price acceptable to the owner.” Wharton on Agency, Sec. 328; Keys v. Johnson, 68 Pa. St. 42; Kock v. Emmerling, 22 How. (U. S.) 69.
    Even when, after the purchaser comes in, the vendor voluntarily reduces the price of the property or the quantity, or otherwise changes the terms of sale as proposed to the broke:-, so that a sale is consummated, or terms or conditions are offered which the proposed buyer is ready and willing to accept, in either case the broker will be entitled to his commissions at the rate specified in his agreement with his principal. Wharton on Agency, Sec. 329; Stewart v. Mather, 32 Wis. 344.
    In Stewart v. Mather, supra, the court used the following language on this point:

      “ Where the price or other terms of sale are fixed by the seller, in accordance with which the broker undertakes to produce a purchaser, yet if, upon procurement of the broker, a purchaser comes, with whom the seller negotiates, and thereupon voluntarily reduces the price of the thing to be sold, or the quantity, or otherwise changes the terms of sale as proposed to the broker, so that a sale is consummated, or terms or conditions are offered which the party proposing to buy is ready and agrees to accept, then, and in either such case, the broker will be entitled to his commissions at the rate specified in his agreement with his principal.” Woods v. Stephens, 46 Mo. 555; Lincoln v. McClatchie, 36 Conn. 136.

      “ The authorities cited show that whenever the sale is effected through the efforts of the broker, or through information derived from him, so that he maybe said to have been the procuring cause of it, his services are regarded as highly meritorious and beneficial, and the law leans to that construction which will best secure the payment of liis commissions, rather than the contrary.”
    While negotiations by a broker are merely pending, the owner, having committed the matter to the broker, can not resume its control so as to escape commissions. Wharton on Agency, Sec. 327; Keys v. Johnson, 68 Pa. St. 42.
   Moran, J.

The evidence in this record discloses the following facts: Late in November, 1885, appellee solicited from appellant the sale of certain property situate on Archer avenue, belonging to the wife of appellant. Appellant consented, and appellee advertised the property extensively and at considerable cost and procured it to be listed at an auction of real estate, but did not succeed in effecting a sale. About the middle of April, 1886, appellee, in a conversation had with E. Pardridge, called his attention to the property and afterward wrote him a note giving a detailed description, stating the price, etc., and Pardridge went to look at the property, and after inspecting it told appellee that he did not want it; that he would not buy it; that it was situated in a bad neighborhood.

The property was not afterward called to Pardridge’s attention by appellee. In May, 1887, one Pflaum, who is a real estate broker, knowing that Pardridge had premises on South Park avenue which he wanted to trade, commenced negotiations between Pardridge and appellant for a trade of the South Park avenue property for the Archer avenue property, and brought the parties together, and a contract for the exchange of the property was made. Pending the negotiations Pardridge, having some dispute with appellant as to the price for which the Archer avenue property had been offered by appellee for sale, went to see appellee, and asked what that price was, and appellee told him, and Pardridge then said that he thought of trading the South Park house for the property. Appellee soon after met appellant and stated the inquiry that Pardridge made and appellant told him that he had made a contract through Pflaum with Pardridge for a trade for the South Park avenue house.

As to the foregoing facts there is no dispute between the parties, but as to some other facts there is a conflict in the evidence. Appellee claims that appellant gave him the exclusive agency for the sale of the property; appellant denies that he gave the exclusive agency, and swears that he told appellant that several brokers had the property.

Appellee contends that appellant, before he closed the trade with Pardridge, asked his opinion of the transaction; that he told him that it would be a good thing to do and that Pardridge was his customer, and he should claim his commissions. Appellant asserts that he did not ask appellee’s advice as to the trade, but told him he had already made the contract to trade, and that ajjpellee tried to dissuade him, saying that the South Park avenue house stood empty and was hard to rent; that appellee in that conversation claimed no commission of him but claimed that Pflaum ought to divide commissions with him.

Appellee in his testimony based his claim to recover on two grounds, viz.: His exclusive agency to sell the property, and the fact that he first offered the property to Pardridge for sale and that before the trade was made, Davis and Pardridge got his judgment on the matter.

It is, in our opinion, very clear upon the whole record, that appellee did not earn commissions by the performance of his contract. His agency was to sell the property at a specified sum. It would be absurd to say that he could earn his commissions by bringing to his principal a customer with a mere offer to trade for the property. It is true that if Pardridge) when he went to look at the property at appellee’s instance, had offered to trade with appellant, and an exchange was brought about between them by negotiations instituted by the efforts of appellee, he would have a claim for his commissions founded on a basis of justice, for the parties were brought into communication through his agency, and the principal having the power to negotiate with the purchaser on different terms, his doing so would be a waiver of the terms given to the agent. In such case the endeavor of the agent would be the efficient cause of procuring the transaction. But the evidence in this record shows no such case. Here, a year before the trade was made, Pardridge had absolutely declined to have anything to do with the property on the terms on which appellee was authorized to offer it, and no negotiations of any bind between appellant and Pardridge resulted from the meeting brought about by appellee. At that time trading does not seem to have entered the thoughts of either party. The exchange of properties was brought about a year later by another broker, who got the parties together on a proposition to trade appellant’s property instead of to sell it.

The fact that appellee first called Pardridge’s attention to the property can not be held, as it seems to us, to have contributed proximately to the subsequent trade between the parties. All the attempts on the part of appellee to induce Pardridge to purchase the property had ceased more than a year before Pflaum brought the parties together in the trade negotiation.

The fact that a sale or exchange of the property is finally brought about by the efforts of the principal or another broker with a person with whom the first broker had previously negotiated without success, will not furnish a legal basis for a claim for commissions by the first broker, especially when it appears that the first broker has for a long time ceased negotiations with the purchaser, and abandoned all efforts to induce him to take the property on the proposed terms. Lipe v. Ludewick, 14 Ill. App. 372] Sibbald v. Bethlehem Iron Works, 83 N. Y. 378.

In the case last cited it was said that “a broker is never entitled to his commissions for unsuccessful efforts. The risk of failure is wholly his. The broker may devote his time and labor and expend his money with ever so much devotion to the interest of his employer, and yet if he fails—if, without effecting an agreement or accomplishing a bargain, he abandons the effort, or his authority is in good faith terminated, he gains no right to commissions. * * * And in such event it matters not that after his failure and the termination of his agency what he has done proves of use and benefit to the principal. In a multitude of cases that must necessarily result. He may have introduced to each other parties who otherwise would have never met; he may have created impressions which, under later and more favorable circumstances, naturally led to, and materially assisted in the consummation of a sale; he may have planted the very seed from which others reap the harvest, but all that gives no claim.”

But it is claimed that appellee earned his commissions in this case because he advised the parties to conclude the trade-It may be doubtful whether merely advising the consummation of a bargain, of which the efforts of a rival are the procuring cause, would entitle a broker to commissions. It ought certainly to be shown that the advice given contributed so materially to the result as to be fairly entitled to be regarded as the procuring cause of the transaction.

In view of the foregoing considerations the instruction given on behalf of appellee by the court below was, as applied to the facts of this case, misleading in its tendency. Said instruction is as follows:

“If the jury believe from the evidence that the defendant employed the plaintiff as his broker to assist the defendant to make a sale of his property on Archer avenue, Chicago, and that the plaintiff did assist the defendant in disposing of his said property, and that the defendant in fact made a trade of said property upon the terms proved in evidence, then the plaintiff is entitled to recover the value of such services according to the usual rates paid therefor in the city of Chicago although there may have been a change in the proposition or terms of sale.”

Under this instruction if the jury should believe that the fact of appellee’s calling Pardridge’s attention to the property, stating to him the price and urging it upon him as an investment, did in fact assist appellant in ever so remote a degree in finally disposing of it, then appellee should be entitled to his commissions,, notwithstanding they might believe that the natural and proximate cause of the transaction was to be found in the efforts of Pflaum. So if the jury believed that appellee gave the advice which he testified he gave, and that such advice tended to aid the consummation of the bargain, he should have commissions, even though such advice was not the procuring cause of the transaction. As we have already seen, such is not the law. In order to be entitled to commissions it is indispensable that the broker should show that he has produced a purchaser ready and willing to take the property on the terms specified, or that his efforts were the procuring cause of the sale which the principal has made to the purchaser with whom he has been brought into communication. Mechem on Agency, Sec. 966, and cases cited.

Of course if there is bad faith on the part of the principal, or if he puts the property in the hands of other brokers when he has given it to one under an agreement that he shall have the exclusive agency, a different question is presented. Appellee does claim that he had the exclusive agency in this case, but the case was not submitted to the jury on any such theory, and we are not at this time called on to discuss the law applicable to that phase of the case.

The judgment must be reversed and the case remanded.

Reversed and remanded,


author: Gary, J.

text:
    City Cab Company v. Thomas W. Taylor.

      Bill of Exceptions—Propositions of Lato.

    Propositions of law submitted to the court, not incorporated into the bill of exceptions but copied by the clerk into the transcript of the record, can not be considered by this court.
    [Opinion filed January 16, 1889.]
    Appeal from the Oountv Court of Cook County; the Hon. Bichaed Pbendergast, Judge, presiding.

      Messrs. Gardner, MoFadon & Gardner, for appellant.
    Mr. E. F. Allen, for appellee.
   Gary, J.

The record of this case does not present the evidence and the finding of the judge, trying the case without a jury, in, such a manner that the court can review that finding, and that evidence is such that it may be safely said that the finding is final either way. It would be of no benefit to recite it.

The original bill of exceptions is brought here under the act concerning fees and costs, approved June 15, 1887, and recites that the appellant submitted to the court the following propositions of law, to wit, propositions 1, 2, 3 and 4 and then says : “ Here insert propositions 1, 2, 3, and 4;” but they are not there.

It may be conjectured that some propositions copied by the clerk into that part of the record preceding the bill of exceptions are those referred to, but the judgment of the County Court is not to be overturned upon conjecture.

Judgment affirmed.


text:
    Grant Newell, Administrator, v. Catherine Montgomery et al.

      Administration—Trusts—Error without Prejudice.

    1. Upon petition to sell real estate on account of a deficiency of personal estate to pay debts, the Probate Court, having equity powers, will recognize a trust existing in favor of a third person.
    2. The appellant can not assign as error, action that does not prejudice his rights.
    [Opinion filed January 16, 1889.]
    Appeal from the Probate Court of Cook County; the Hon. Joshua C. Knickerbocker, Judge, presiding.

      Mr. Lynden Evans, for appellant.
    “ The clear result,” says Lord Chief Baron Eyre, “of all the eases, without a single exception, is that the trust of a legal estate, whether freehold, copyhold or leasehold; whether taken in the names of the purchaser and others jointly, or in the names of others without that of the purchaser; whether in one name or several; whether jointly or successively, results to the man who advances the purchase money.” Dyer v. Dyer, 2 Cox, at 93.
    Mo evidence was offered to show that the heirs of Robert M. Montgomery advanced the purchase money. This of itself is fatal to the trust theory of defendants, and is urged as a ground for reversal. In support of this I might cite cases without number, but prefer to rely on the principle as laid down by Baron Eyre, and as followed by Lord Eldon in Murless v. Franklin, 1 Sw. 17, 18, and by Lord Hardwicke, Willis v. Willis, 2 Atk. 71, and 2 Lomax Digest, 200. As established in this country, the doctrine is laid down in Perry on Trusts, 8ec. 126, and by our Illinois Supreme Court, in Merwitz v. Floring, 2 N. E. Rep. 530.
    That case was a bill to establish a trust in real property, and the court says, “unless complainant’s money was used in making the payment for the land, of course no resulting trust could arise.” The principle is also laid down in McDonald v. Stow, 109 Ill. 40, and in Coates v. Woodworth, 13 Ill. 634, and if this is the law, there being no word in the whole record to show that the heirs of Robert M. Montgomery paid the purchase price of the lot in question, the alleged trust has not been established according to law, and the finding of the Probate Court must be erroneous.
    To raise a trust, money must be paid by cestui gue trust as purchaser. If transaction can be called a loan, no trust will arise.
    If defendants’ witness Moloney is to be believed, Father Terry in part used his own funds and in part borrowed to make up the sum needed, and no trust will result unless the person advance the purchase money as a 'purchaser. See Perry on Trusts, Vol. 1, Sec. 143. This question was consideved at length and the same principle laid down by Sir William Grant in Aveling v. Knife, 19 Ves., at 144.
    In Bartlett v. Pickersgill, 1 Eden, 516, decided in 1760 by Lord Keeper Henley, where it was sought to establish a trust made by agreement (and though in that case the party sought to be charged with a trust had been indicted for perjury for denying the trust), still the lord keeper held absolute payment of the purchase money as purchaser was necessary to take the case out of the statute of frauds. If the nominal purchaser is an agent of the cestui que trust this rule is inflexible. An agent may be indicted and convicted of perjury in denying his character as an agent in an answer under oath, yet the court can not decree and establish the trust. Perry on Trusts, Sec. 135.
    Hor can parol evidence be admitted to prove a trust in a person who purchased in his own name, though as an agent of the real purchaser, where no part of the consideration was paid by such employer, for though an agent is a trustee in equity, yet the trust is one arising ex contractu and not by operation of law. Where an agent is directed to purchase by Iiis principal, and does so with his (the agent’s) money, a court of equity has no power to decree a trust, and in this case, if Terry purchased at direction of the Montgomerys, still he paid part of his own money and borrowed part, and no trust can be declared. Lewin on Trusts, etc., Sec. 204; Rostel v. Hutchinson, 1 Dick, 44; Lomas v. Bayly, 2 Vern. 627.
    It was held in Gibson v. Foote, 40 Miss., at page 791, that no presumption would be indulged that money was paid by cestui que trust as purchaser; it must be shown by positive averments to have been advanced as purchase money.
    Such acts of parties at the time of sale have not been shown upon which a trust can result.
    There is no evidence as to any of the acts of the defendants at the time of the sale to Terry. Appellee’s testimony alleges expectations before the sale and promises by Terry afterward. “A trust must result, if at all, the instant, the deed is taken. Ho oral agreements and no payments before or after the title is taken will create a resulting trust unless the transaction is such that the moment the title passes a trust will result from the transaction itself.” Perry on Trusts, 133.
    “ A resulting trust is never created by agreement, but always by implication of law, from such acts, independent of agreement of the parties; but a trust created by verbal agreement, being like any other verbal agreement for the sale of lands, is prohibited by the statute of frauds, and will not be enforced in equity.” See Holmes v. Holmes, 44 Ill. 68; also Sheldon v. Harding, 44 Ill. 168, where the doctrine is discussed at length.
    A trust must be coeval with the deed. Whiting v. Gould, 2 Wis. 552.
    Declarations or agreements before the sale will not raise a trust.
    Appellee’s witness states that Terry and the Montgomery heirs had an agreement to purchase these lands; that Terry was to “save part of them for the children;” but the rule of law is that parol evidence is inadmissible to show a contract for a trust. Hovey v. Holcomb, 11 Ill. 660; Perry v. McHenry, 13 Ill. 237.
    Declarations made after the sale will not raise a trust.
    It is next alleged by defendant’s witness that Terry frequently declared after the sale that the premises in question were the property of the Montgomerys. If this were true a trust would not result therefrom.
    “ Ho arrangement subsequent to the purchase, nor parot declaration at the time of the purchase, will raise a trust.” Perry v. McHenry, 13 Ill. 238.
    “Ho subsequent conduct, payment or intervention will raise a resulting trust.” Pomeroy’s Equity, Sec. 1037.
    The evidence must be of great clearness and certainty to prove a trust.
    “Two witnesses, or one with corroborating circumstances,” are required to control an answer under oath. Proof of mere admissions by one that he purchased for another, without proofs of some previous arrangement or advance of money by such, is insufficient to create a resulting trust.” Perry on Trusts, Vol. 1, Sec. 137.

      In order to create a trust, the facts in all cases must be proved with great clearness and certainty. Clark v. Quackenboss, 27 Ill. 260; Slocum v. Marshall, 2 Wash. C. C. 397.
    Mr. W. H. Stead, for appellee.
    The court will perceive that here is where an administrator makes application to sell estate to pay debts. Under our statute every person having any interest in the land about to be sold must be made a party to the suit. And the practice in such cases is to be the same as in chancery. Chap. 3, Secs. 99-101 inclusive.
    A petition stating facts sufficient to bring the pleader within the statute must be filed. Interested parties are brought into court. They have a right to answer and show why such property ought not be sold; otherwise it were the veriest farce to provide for their being made parties to the proceedings.
    If this is so, and the answer filed herein discloses the fact that Father Terry had no interest in the premises sought to be sold, or that the defense interposed was obnoxious to the statute of frauds, it was the imperative duty of the appellant to interpose said statute in the court below. That no such thing was done is conclusive. And it is equally conclusive that such statute can not be interposed for the first time in an appellate tribunal. Boston v. Nichols, 47 Ill. 353.
    In such cases the defendant must set up the statute in his plea or answer if he desires to avail of it as a defense. If the matter is first introduced in answer, the complainant may set up the statute by amending his bill or petition. Tarleton v. Vietes, 1 Gilm. 470.
    Nothing of the kind has been done in this case. The bar of the statute for the first time is attempted to be interposed in the argument in this court. It can not be done. Even a contract arising out of the imaginary condition of affairs, contended for by appellant, would be only voidable and would be enforced like any valid contract unless the statute of frauds is interposed. Collins v. Thayer, 74 Ill. 138; Wheeler v. Frankenthal, 78 Ill. 124; McCoy v. Williams, 1 Gilm. 584.
   Gary, J.

The deceased was a priest of the Roman Catholic Church, for many years pastor of a church in Ottawa, but died a resident of Chicago. The lot was once the property of one Robert Montgomery and was sold under a decree of the Circuit Court of La Salle county after his death, and, by friendly arrangement between the widow and Terry, was bought in by him.

He had been fully reimbursed, and held the title only for her and her children; was always ready to convey to her, oías she might direct, but the business was neglected and he died holding the title in trust, with nothing in writing as evidence oí the trust, nor any circumstances from which the law could raise a resulting trust.

Under the amendment of the administration act, approved June 15, 1887, the Probate Court has equity powers in cases of this class, and the practice is required to be as in cases in chancery. When the answer of Mrs. Montgomery came in, asserting the trust, there was no amendment of the petition setting up the statute of frauds in opposition to the trust. But if there had been, the court would not have been justified, in the exercise of its equitable powers, in enforcing a naked legal right against conscience. Browne, Statute of Frauds, Sec. 129.

Whether there is any error in any other part of the decree than that dismissing the petition is a matter which does not concern the appellant. He can not assign as error, action that does not prejudice him. Wright v. Bishop, 88 Ill. 302.

Decree affirmed.


text:
    John W. Norris v. Merchants National Bank of Deadwood, Dakota.

      Attachment—National Banks—Statutes—Waiver of Privilege—Pleading.

    1. A plea of the general issue is a waiver of all matter of abatement.
    2. The effect of congressional legislation in relation to national banks' prior to the act of July 12, 1882, was to prohibit the issue by State courts of attachments against them. If such prohibition continues, it is a privilege which may be waived.
    [Opinion filed January 16, 1889.]
    In error to the Superior Court of Cook County; the Hon. Elliott Anthony, Judge, presiding.
    Messrs. Wilber, Eldridge & Clark, for plaintiff in error.
    Messrs. Fairchild & Queeny, for defendant in error.
   Gary, J.

On the 18th of August, 1887, the plaintiff filed in the Superior Court his affidavit and bond for an attachment against the defendants. On the same day a writ of attachment was issued and served upon garnishees, and on the 24th the plaintiff filed his declaration. On the Slst the attorneys of the defendants entered the special appearance of the defendants, “ for the purpose of moving to dismiss the suit for want of jurisdiction.” September 7th a garnishee answered,. acknowledging indebtedness to the defendants. September 21, 1887, defendants filed the general issue, and November 7th, moved the court to dismiss the suit for want of jurisdiction, which motion the court took under advisement until April 7, 1888. and then denied it. April 21st, on the motion of the defendants, the court set aside the order of the 7th, gave the defendants leave to withdraw their plea, and dismissed the suit, and on the 28th refused to set aside this last order.

It is upon these proceedings that the plaintiff now assigns error.

It is undoubtedly true that before the act of July 12, 1882, amending the national banking law, the effect of the voluminous legislation by Congress in relation to national banks did prohibit the issuance of attachments out of State courts against them. Butler v. Coleman, 124 U. S. 721.

Whether that act, which provides that the jurisdiction for suits’against them shall be the same as, and not other than the jurisdiction for suits against banks not organized under any law of the United States, removes that prohibition, is a debatable question. It is not necessary to consider it in this case, for if the prohibition continues, it is a personal privilege of the defendants, which they may waive (Kenney v. Greer, 13 Ill. 432), as they have done.

The defendants did not move to dismiss the suit until November 7, 1887, although August 31st they had entered a special appearance, as they said, for that purpose, and in the meantime, September 21st, they had pleaded the general issue. All matter in abatement was thereby waived. Roberts v. Thompson, 28 Ill. 79. A suit in rem had become a suit in 'personam.

It is not necessary to consider whether it would have been a proper exercise of discretion for the court to have permitted the defendants to withdraw their general appearance to enable them to urge an objection which did not touch the merits (Dana v. Adams, 13 Ill. 691), as no such leave was given or asked. Withdrawing the plea only, left the appearance unaffected. See case last cited, and Dart v. Hercules, 34 Ill. 395.

The judgment must be reversed and the cause remanded for further proceedings upon the merits.

Reversed and remanded.


text:
    Frank Stroner, for use, etc., v. John Prokop.

      Attachment—Garnishment—Service—Evidence—Return.

    1. In the absence of the original attachment writ, a recital in the transcript that it was served, is not conclusive.
    2. In the case presented, the court below properly excluded affidavits to show service of the writ, the return being primary evidence of service.
    [Opinion filed January 16, 1889.]
    In error to the Circuit Court of Cook County; the Hon. Hollín S. Williamson, Judge, presiding.
    Messrs. Jones. & Lusk, for plaintiff in error.
    In no part of the record proper is any want of jurisdiction shown. There never was any order, or even motion, to strike out any portion of the transcript. The transcript shows good service of both writs. It is made part of the petition. The allegation inserted by way of amendment, November 28, 1887, that the court acted without jurisdiction, if it were good for anything, is contradicted by statements in the transcript, and therefore did not make the petition any better. The petition itself, including the transcript, showed on its face good service and complete jurisdiction of all the persons sought to be charged, and also of the subj'ect-matter, and the motion ought therefore to have been sustained. That the return of an officer can not be contradicted is well settled. Fitzgerald v. Kimball, 86 Ill. 396; Brown v. Brown, 59 Ill. 315; Hunter v. Stoneburner, 92 Ill. 75.
    Even if the supposed defective return of service were in the petition it would not sustain the allegation of want of j urisdiction. The return is good. Cairo & St. L. R. R. Co. v. Holbrook, 92 Ill. 297; McNab v. Young, 81 Ill. 11.
    The error of this court in overruling plaintiff’s motion to quash can not be aided by any evidence introduced at the trial, the admission of all such evidence being erroneous.

      Messrs. Kraus, Mayer & Stein, for defendant in error.
    A justice of the peace has no common' law power, but is dependent entirely upon the constitution and statute for his authority and jurisdiction. He can take nothing by implication, and the jurisdiction is never presumed, but must be proven in every instance. Moore’s Justice, Sec. 27.
    Nothing can be presumed in favor of the jurisdiction of an inferior court of limited jurisdiction. Schufeldt v. Buckley, 45 Ill. 223; Wells v. Mason, 4 Scam. 84.
    Nothing shall be intended to be within the jurisdiction of an inferior court but that which is so expressly alleged. This language has been so often repeated by courts and text-writers as to have become a maxim. The rule is that jurisdiction must affirmatively appear upon the record. Dunbar v. Hallowed, 34 Ill. 168.
    It is not the parties, the justice of the peace, the summons nor the service which confers jurisdiction, but it is the statute. Ohio & Miss. R. R. Co. v. McCutchin, 27 Ill. 12.
    In Wightman v. Karsner, 20 Ala. 446, the court says: “ Before a court of limited jurisdiction will be sustained in its action, even in cases which, by the law creating it, it has full power to hear and determine, it must be shown by the record that every preliminary requirement of the law has been complied with before he acted.” Haggard v. Atlantic, 63 Mo. 362.
    The jurisdiction of a justice of the peace must appear affirmatively on the face of the proceeding; otherwise his acts are void.
    A constable’s return upon the summons “ duly served by reading June 16th, 1848,” is bad, and gives the justice no jurisdiction, because the return does not show that the summons was served on the defendant. Pardon v. Dwire, 23 Ill. 523.
    In the present case we claim that the justice had no jurisdiction to proceed on the return of the officer, and render judgment, and that therefore the judgment is void; that the return of the officer does not show that he served the writs or either of them on John Prokop, the defendant in error, and that, as it does not affirmatively appear by the return of the writ that John Prokop was served, his denial of service is not a denial of the return of the officer.
   Gary, J.

Fortunately for the appellee in this case, this court may decide according to the apparent justice of it without trenching upon the doctrine of the almost conclusive verity of the officer’s return.

This was an appeal by certiorari in which the petition of the appellee alleged that he was never served with the original attachment writ, as a garnishee, nor with the sci. fa. after the conditional judgment, though the transcript of the justice shows that the constable returned the writ served upon him. The original attachment writ was not brought in, in the Circuit Court, so that there was only the statement, in the transcript that it was ever served, and there is no authority that a recital in the transcript of the acts of the constable is conclusive. As to the sci. fa., it is unnecessary to decide whether the return upon it was good or not, for if there was no foundation for the conditional judgment, the sai. fa. was a nullity.

The court properly refused to admit affidavits offered by appellant to show service of the original attachment writ. The return upon the writ itself was primary evidence of the service, and other evidence could only be admitted to supply the place of that, if lost, or in corroboration of it, if produced. What the contents of the affidavits were does not appear, and it can not be ascertained whether they even tended to show service.

On the merits, the appellant relied wholly upon the testimony of the appellee, who swore that he owed Stroner nothing, and therefore the only claim of the appellant is that he has got the appellee in a trap in which the court ought to hold him.

Judgment affirmed.


text:
    Patrick F. Murtaugh v. Julia Murphy.
    Limitations— Open Account — Payments—Application—Credibility of Witness—Instructions.

      1. It is improper to instruct the jury that if they believe that a witness ‘‘ has testified falsely upon any material matter,” they may disregard his entire testimony except so far as corroborated.
    2. In am action on an open account an instruction for the defendant touching the statute of limitations, which contained no reference to certain payments, was improperly refused, there being nothing to indicate any application by the defendant of such payments to any particular demand.
    [Opinion filed January 16, 1889.]
    Appeal from the Circuit Court of Cook County; the Hon. Eichard S. Tuthill, Judge, presiding.
    Mr. C. Stuart Beattie, for appellant.
    The second instruction given for the plaintiff took from the iury entirely the principal element upon which the jury should have acted in determining the credibility of the appellant upon the stand, namely, whether the false testimony “was wilfully and knowingly false.”
    This identical instruction has been considered and rebuked in over a score of cases in this State, and as many judgments reversed on account of it. Chittenden v. Evans, 41 Ill. 253; U. S. Ex. Co. v. Hutchins, 58 Ill. 45; City, etc. v. Smith, 48 Ill. 108; Pope v. Dodson, 58 Ill. 108; Gullier v. People, 82 Ill. 146; Otmer v. People, 76 Ill. 152.
    “Payments credited by the plaintiff on account, the defendant keeping no account, does not bring the case within the exception of mutual accounts.” Prenatt v. Runyan, 12 Ind. 174; Dyer v. Walker, 57 Maine, 104; Peck v. N. Y. S. Co., 5 Bosw. (N. Y.) 226; Weatherwax v. Cosumnes, 17 Cal. 344.
    Appellee herself kept no memorandum or book entry of the divers payments she pretends to have received. The true rule on the alleged facts is as follows:

      “ If in a continuous account some items have accrued before, and others within six (5) years, the mere payment of a sum by the debtor, without any evidence of an appropriation on his part or of an intention to apply such sum in part discharge of the earlier items, will not have the effect of exempting them from the operation of the statute. In such case the creditor may at any time apply the payment to the debts that have been due for a longer period than six (5) years.” 2 Taylor on Ev. 1081.
    “Where an instruction, which is in conformity with law, is asked, based on the evidence, and presenting a view of the case which may be controlling, and which is not covered by any other instruction, a refusal to give it will cause a reversal of the case. Bennett v. Connolly, 103 Ill. 50; State v. Wilson, 2 Scam. 225; Cohen v. Schick, 6 Ill. App. 280; C., B. & Q. Ry. Co. v. Warner, 108 Ill. 538.” Stearns v. Reidy, 18 Ill. App. 585.
    Mr. Robert Van Sands, for appellee.
   Gary, J.

May 10, 1887, the appellee sued upon an account beginning in January, 1880. An issue was made upon the statute of limitations of five years. There was no evidence of any promise, and of payment, only her testimony that “ whenever I needed money for my own use I got it from him. This I did on several occasions since 1880. The last payment I got from him was §9, in the fall of 1885, to pay a balance I owed a carpet weaver.”

The appellant testified that she did his washing for the rent, and never asked him for any money. Upon another point the appellant was contradicted by other testimony.

Among other instructions the jury were told: “If the jury believe that any witness who has testified in this case has testified falsely upon any material matter in this case, then the jury have a right to disregard his entire testimony, except so far as the same may be corroborated by other evidence.” This is error. Pope v. Dodson, 58 Ill. 360. The appellee intended, and the jury understood, this instruction to be pointed at the appellant. The instruction, besides omitting any reference to the evidence as the ground of belief by the jury (Freeport v. Isbell, 83 Ill. 440; Horne v. Walton, 117 Ill. 130),treats a mistake, however innocent, of the witness, as having the same effect upon his credibility as wilful perjury.

The appellant asked and the court refused this instruction : “The court instructs the jury that in cases like the one on trial, unless the suit is commenced within five years after the cause of action accrues, then the statute of limitations is a complete bar; that in the absence of any different contract, the defendant became indebted to the plaintiff (if he became indebted to the plaintiff at all) as soon as the work was done, and unless the jury believe that the defendant was to have time in which to pay for the work, then they are instructed to disallow all claims for work done more than five years from the commencement of this suit.” This was also error. If the appellee did get money from the appellant, as she testified, there is nothing in the case to indicate any application by the appellant of money so paid to any particular demand. And without such application by him, that is, without evidence that he, when he paid, intended that payment to apply as part payment of a larger demand, so identified as to be now ascertainable, such payment has no effect upon the running of the statute (Angell, Lim., Sec. 244; Taylor, Ev., Sec. 1081), and, therefore, no reference to that money was necessary to make the instruction proper.

As part of the account accrued more than seven years before the suit was commenced, the appellant was entitled to this instruction. As the judgment must be reversed for these errors, nothing will be said about the newly discovered evidence.

Reversed and remanded.


text:
    James L. Rubel v. John G. Elliott.

      Attorney and Client—Contract for Services—Champerty—Ultra Vires— Remittitur.
    Under a special contract to pay an attorney a certain contingent fee for successfully defending a suit and a per diem for time employed in case of abandonment by the client, upon such abandonment the recovery of the per diem allowance can not exceed the amount of the contingent fee.
    [Opinion filed January 16, 1889.]
    Appeal from the County Court of Cook County; the Hon. Biohabd Pbendergast, Judge, presiding.
    Messrs. Tenney, Bashford & Tenney, for appellant.
    In this country a corporation can not become a stockholder in another corporation, unless by powers specifically granted, especially if it be for the purpose of controlling or affecting the management of the other corporation. Green’s Brice’s Ultra Vires (2d Ed.), p. 91 (note B), and cases there cited.
    A corporation may, under certain circumstances, purchase its own stock, if it has a surplus that can be used for that purpose, or if it is necessary to save itself from loss. It can not do so to the prejudice of its creditors. Clapp v. Peterson, 104 Ill. 26.
    The right to purchase and hold stock in another corporation is a very different question. If a corporation can become a subscriber to the stock of another corporation, for the purpose of controlling its management, the limitations hitherto imposed on corporate powers are swept away, and the rights of stockholders and creditors, and of the public, are made subject to the cupidity or caprice of a majority of one in a board of directors.

      An agreement entered into before the new company was formed, and made in contemplation of its organization, would not be binding upon it, and could not be enforced (Gent v. Man. & Mer. Mut. Ins. Co., 107 Ill. 652), and consequently such a contract would furnish no consideration for the engagements of the W. O. Tyler Paper Co., and they were ultra vires, as Elliott must have known.
    The W. O. Tyler Paper Company having no valid interest in the patent right, its agreement with Elliott to pay the expenses of the litigation with the Hammerschlag Manufacturing Company in the United States Court was clearly main-ten ous and champertous, and the court will not enforce his claimfor services against the corporation. McGoon v. Ankeny, 11 Ill. 558; Norton v. Tuttle, 60 Ill. 130; Gilbert v. Holmes, 64 Ill. 554; Walsh v. Shumway, 65 Ill. 471; Thompson v. Reynolds, 73 Ill. 11; Coleman v. Billings, 89 Ill. 183.
    The contract in the first clause provides for the payment of $3,000 absolutely for the services of the attorney by the company; the second clause provides for the payment of $50 a day for services if the company abandons the suit; the third clause expressly stipulates that the attorney shall have no claim upon the aforesaid $3,000, except as provided for in clause two of this agreement, until a favorable decision shall have been rendered. It is clear, from these provisions, that the sum of $3,000 was to be the limit of the attorney’s charges in any event, and that in case the suit was abandoned he should be paid at the rate of $50 per day, not exceeding-that sum. It is absurd to suppose that the Tyler Paper Company stipulated to pay a greater sum for a portion of the attorney’s services which had availed them nothing than his entire services were agreed to be worth in case he succeeded in the litigation. There is no ground for the contention that the greater sum was intended for a penalty. The contract does not warrant any such construction. If that had been in contemplation, the rights of the company would have been guarded by some provision for abandoning the suit at different stages of the litigation. Were not the heavy disbursements paid by the company, aggregating over $10,000, none of which could be recovered unless the litigation proved successful, a sufficient inducement for it to vigorously prosecute the suit as long as there was any reasonable ground to hope for a favorable issue ?
    Weeks on Attorney at Law, referring to the subject of compensation by special agreement, says (p. 580): “If the special agreement is rescinded or is void for champerty, the attorney ma.y recover on a quantum, meruit for his services, but he is limited in such suit to the valuation he himself attaches to his services in the special agreement.”
    Mr. Frank A. Moore, for appellee.
    The object of defending the suit was to break down the Hammerschlag patent; the Bancroft patent could not be established in that suit. If the defendants succeeded, then the trade would be freed from the monopoly created by the Hammerschlag patent, and that process of manufacturing would be open to the world; and the Tyler Paper Co. had, in common with the entire paper trade, that interest in the subject-matter of the litigation, viz., to destroy that monopoly'—■ a legitimate interest, and a sufficient interest to justify it in taking an active part in the defense of the pending litigation, independent of its contract with Bancroft, and of any rights acquired under that contract, and a benefit and advantage which it would enjoy though its contract with Bancroft might be void, and though the corporation contemplated by that contract should never be formed.
    In this connection, and also as bearing on the validity of the Bancroft contract, we cite Plating Co. v. Farquharson, L. R. 18, Ch. Div. 49.
    The principle of this decision establishes that any member of a trade subject to a patent monopoly has an interest in any suit involving the validity of that patent, and may legitimately aid in carrying on the litigation though not himself a party ; and we say, therefore, that the Tyler Paper Co. had a sufficient interest to support its contract with appellee for his services, wholly irrespective of the validity of the Bancroft contract.

      Further, appellee’s right to recover is in no way dependent upon the validity of the Bancroft contract. He was not a party to that contract; he claims nothing through or under it; he had nothing to do with it except to draft it; the contract between him and the company is open to no objection; that contract was within the powers of the company; it was not cliampertous; an agreement that an attorney’s fees shall be contingent is not cliampertous, unless he is to pay costs and expenses of litigation. Park Commissioner v. Coleman, 108 Ill. 591; Phillips v. S. P. Commissioners, 10 N. E. Rep. 230.
    It is well established that, while courts are prompt to interfere, in advance, to restrain corporations from passing beyond the boundaries of their charters, yet they will enforce, against private corporations, organized for pecuniary gain, contracts, though ultra vires, of which they have received the benefit. Bradley v. Ballard, 55 Ill. 413; Chicago Building Society v. Crowell, 65 Ill. 453.
    The only fair construction of the contract is that an appeal should be taken to the Supreme Court of tlpe United States if the decision of the Circuit Court should be adverse. This necessarily follows from the language used in the beginning of the third clause, which is wholly ignored by appellant’s counsel, namely: that appellee shall devote his services in defending the suit “ to a final termination before the Supreme Court of the United States if it shall be necessary to establish the supposed rights of the defendants, or either of them.”
   Gary, J.

On the 5th day of August, 1885, the W. O. Tyler Paper Company (of which the appellant is the assignee in insolvency), as the party of the first part, and the appellee, as party of the second part, made this agreement:

"Whereas, the party of the first part desire to prosecute, for the defense, a suit now pending in the United States Circuit Court for the Northern District of Illinois, entitled The Hammerschlag Mnfg. Co. v. The F. W. Butler Paper Co. and George W. Bancroft, and of employing the party of the second part as their attorney therein.
“ Now, therefore, the parties have agreed as follows:
“ 1. The party of the first part, in consideration of the promises and agreements hereinafter made, and the services of the party of the second part, agree to pay the party of the second part the sum of three thousand ($3,000) dollars as attorney fees in said suit, and also to pay all expenses of every kind incurred in said suit from the time the motion for preliminary injunction was granted to the determination thereof, including traveling expenses, witness fees, planting, costs of exhibits, and all expenses which are common to patent litigation.
“ 2. The party of the first part further agrees that, if at any time during the progress of said suit, it fails to advance the money necessary to pay the aforesaid expenses as they accrue, or notify the party of the second part of its intention not to further prosecute said suit, then the party of the first part agrees to pay the party of the second part the sum of fifty ($50) dollars for each and every day’s service he may-have rendered in said suit up to the date of said notice.
“ 3. The party of the second part, for and in consideration of the promises and agreements herein made, agrees to devote his professional services, and to the best of his abilities, in defending the aforesaid suit to a final termination before the Supreme Court of the United States, if necessary to establish the supposed rights of the aforesaid defendants, or either of them, and that he has no claim upon the aforesaid three thousand ($3,000) dollars (except as provided for in clause 2 of this agreement), until a decision shall have been rendered in the United States Circuit Court for the Northern District of Illinois, or the Supreme Court of the United States, by which the defendant, George W. Bancroft, has the right to manufacture paraffine waxed paper under his patent involved in said suit.”

The appellant objects that this was an illegal, and therefore void, agreement, as being beyond the corporate powers of the company, and champertous. Without discussion those objections are overruled.

The company failed in August, 1887, and the next month the United States Circuit Court for the Northern District of Illinois decided the case mentioned in the agreement adversely to the interests of these parties. The appellant furnished no money for expenses; over $10,000 had already been expended; appellee had. received no fees, and appellee filed his claim against thp appellant for his per diem, under the second paragraph of the contract, which was allowed—247 days, $12,250.

The construction upon which that allowance was made was that the company was, under the third paragraph of the contract, bound to carry the case to the Supreme Court of the United States if the decision of the Circuit Court was adverse, or pay appellee, if he was ready and willing to perform on his part, §50 for every day he had been employed in the case. This construction is right, with the limitation that the per diem can not exceed the whole reward for success.

Besides the inconsistency of requiring a party to pay more for non-acceptance of performance of a contract than for performance itself, the third paragraph treats the per diem as a claim that might arise, under which appellee might be entitled to part, or all, of the $3,000. The words are “no claim upon the aforesaid three thousand dollars (except as provided for in clause 2 of this agreement).” If the per diem is a claim upon, it can not exceed the $3,000. If within twenty days after this opinion is filed, the appellee remits all above $3,000 of the sum allowed him, the judgment of the County Court for $3,000 will be affirmed; if not, it, will be reversed; in either event, the appellant to recover his costs in this court.


text:
    Joseph Gregg v. George M. Hord.
    Partnership—Accounting—Evidence„
    Upon a bill for an accounting, this court holds that the evidence sustains the decree of the court below allowing certain items for clerical hire, interest and office expenses as partnership expenses.
    [Opinion filed January 16, 1889.]

      Appeal from the Superior Court of Cook County; the Hon. Gwynn Garnett, Judge, presiding.
    Messrs. F. J. Smith & Helmer, for appellant.
    Mr. E. A. Otis, for appellee.
   Gary, J.

The parties to this suit entered into a partnership on the 1st of ¡November, 1881, under an agreement as follows:

“Chicago, III., ¡November 1, 1881.
“The undersigned, Geo. M. Hord and Joseph Gregg, have this day formed a copartnership for the transaction of a legitimate commission business, based on cash orders. Geo. M. Hord to furnish'the capital required and to pay all office and clerical expenses and stationery bills. Profits and losses to be equally divided, after paying cost of telegrams and other expenses incidental to the cash business. This partnership to last for five years, unless sooner dissolved by mutual consent or by death of one of the contracting parties. Joseph Gregg to give his entire time and attention to the business. As a protection to Geo. M. Hord against losses, Joseph Gregg shall each year leave undrawn one thousand dollars of his share of the profits, which shall accumulate as additional capital until the termination of this contract, when the amount shall be paid over to Joseph Gregg.
(Signed) “Geo. M. Hoed,
“Joseph Geegg.”

This partnership continued until the 1st of May, 1886, when it was terminated by the withdrawal of the appellant. On the 31 of May, 1886, the appellee made a demand upon the appellant for §2,100 on account, upon a brief statement then rendered of the accounts between them, and on the 21st of the same month this bill was filed by the appellant for an account of the partnership affairs.

That accounting resulted in a decree against appellant for $2,639.31, from which this appeal was taken. The original claims of the respective parties have been so narrowed by themselves that the only questions now awaiting decision are upon the allowance in the Superior Court, as partnership expenses, of §4,094.05 for clerical expenses, §450.06 for interest paid, and §150.10 for office expenses, such as towels, stationery, etc. As to these last two sums the only evidence whether they are correct or incorrect is pencil memoranda taken by the appellant, as he says, from the books, and his statement that they are wrongly charged. The many small items which make up these two sums were entered from time to time, through the whole course of the business, in books which the appellant frequently examined, but he now says that he did not know that such items were so entered. The appellee says he never knew anything about them.

The argument is that, as by the original agreement the appellee was to furnish the capital and pay the office expenses, those items are necessarily wrong. The sufficient reply is that the business actually conducted by the partnership was not restricted to that for which it was created, but extended to such as required a greater use of money, which accounts for the interest; and the ambiguity of the agreement as to “ expenses incidental to cash business,” puts the burden upon appellant of showing clearly how it is that, after he has so long acquiesced, the items making up the §150.10 are wrong; §1.80 is for towels, which are probably no more incidental to a cash business than to any other done with clean hands, but the residue of the items, in their nomenclature, do not indicate whether they were peculiarly incidental to the business of the partnership or not. As to the §4,095.05 for clerical expenses, there is very satisfactory proof, supported by the book-keeping, that the parties, for the convenience of the appellant and at his request, employed a stenographer in addition to the clerical force originally intended, upon his undertaking to bear the additional expense.

Judge Garnett, having tried this case in the Superior Court, takes no part in this decision. The decree is affirmed.

Decree affirmed.


text:
    Jacob Wolverton et al. v. George H. Taylor et al.

      Limitations—Corporations—Indebtedness in Excess of Capital Stock— Liability of Directors and Officers.

      1. The statutory liability of directors and officers of any corporation, who assent to the creation of an indebtedness in excess of the capital stock of such corporation, is not a penalty. A bill to enforce such liability is not, therefore, within the limitation of two years.
    2. The statute of limitations begins to run as to such liability when the excess of indebtedness is created with assent of the persons to be charged, without regard to the time of its maturity as against the corporation.
    [Opinion filed January 16, 1889.]
    Appeal from the Superior Court of Cook County; .the Hon. Henby M. Shepabd, Judge, presiding.
    Hr. Considee H. Willett, for appellants.
    If the liability created by the statute is not in the nature of a contract, but a penalty, it is barred in two years.
    “ Penal statute: a statute which forbids an act and punishes the doing or commission of it.” Burrill’s Dictionary.
    “A penal statute is one which imposes a forfeiture or penalty for transgressing its provisions or for doing a thing prohibited.” Potter’s Dwarris on Stat. and Cons. 74.
    “If a statute inflicts a penalty for doing an act, the penalty implies a prohibition, and the thing is unlawful, though there be no prohibitory words in the statute.” 1 Kent’s Com., 407.
    “ When a penalty is imposed for doing or omitting an act the act or omission is thereby prohibited and made unlawful.” Endlich on the Interpretation of Statutes, Sec. 450.
    “A statute would not inflict a penalty on what was lawful; consequently when the thing in respect of which the penalty is imposed is a contract, it is illegal and void.” Ib.
    Eor an argument "showing the distinction between penalties and statutory liabilities we refer to Neal v. Briggs, 12 Ga. 104.

      In the light of these authorities the words of the section to be construed do not create a penalty. There is no express or implied prohibition that it is unlawful for the corporation to become indebted in excess of the capital stock. It is evident that a corporation to trade in paper with a capital stock of $50,000, fully paid, might find it a proper business venture to buy $100,000 worth of goods, paying part cash and obtaining the balance on time. Such an act is the ordinary business act of individuals, of partnerships and of corporations.
    Becoming indebted in excess of the capital stock is a corporate act or debt If a partnership becomes indebted in excess of the partnership funds it is a partnership debt. The partnership assets being insufficient to pay the partnership debts, the individual property of the persons comprising such partnership may be taken to satisfy such demands.
    Debts in excess of the capital stock are valid corporate debts. By virtue of the statute, corporate debts beyond the amount of the capital stock have, to secure their payment, not only the corporation assets, but the “personal and individual” liability of “ the directors and officers of such corporations assenting thereto.”
    This liability springs from the statute. It is primarily imposed by the statute. It is a contract the liability of which is measured by the very words of the statute.
    In Illinois, whenever Sec. 16 has been construed, it has been held that the rights and the liabilities imposed could not be enforced at law. Low v. Buchanan, 94 Ill. 76; affirming Buchanan v. Low, 3 Ill. App. 202; Buchanan v. Barton Iron Co., 3 Ill. App. 191.
    The only remedy to enforce the rights under Sec. 16 being in equity, the statute creates a statutory liability and not a penalty. If the statute created a penalty, an action of law would be the only mode of carrying it into effect.
    A judgment against the corporation is not necessary to enforce the liability. Merchants Bank v. Stevenson, 5 Allen, 308; Queenan v. Palmer, 117 Ill. 619.
    The liability is a creature of the statute. The nature of the liability is ex contractu only because the statute has made it so. The suit is to enforce a liability grounded upon the language of the statute. Terry v. Little, 101 U. S. 216.
    Cases where similar language has been held to create an obligation ex contractu and not a penalty: Norris v. Wrenschall, 34 Md. 492; Sleeper v. Goodwin, 67 Wis. 577.
    Equity is the appropriate remedy to enforce a statutory liability of stockholders. Harper v. Union Manf. Co., 100 Ill. 225; Eames v. Doris, 102 Ill. 350; Thompson v. Meisser, 108 Ill. 359; Tunesma v. Schuttler, 114 Ill. 156; Merchants Bank v. Stevenson, 10 Gray, 232 (directors); Pollard v. Bailey, 87 U. S., 20 Wall. 520; Cook on Stockholders, Sec. 226; cases cited.
    The liability is primary, because it is not prohibited by the statute, but created by it. It is in fact a primary statutory liability, and not a penalty. Queenan v. Palmer, 117 Ill. 627; Fuller v. Ledden, 87 Ill. 310; Allen v. Sewell, 2 Wend 327 ; Todhunter v. Randall, 29 Ind. 275; Young v. Rosenbaum, 39 Cal. 646; Perkins v. Sanders, 56 Miss. 733; Flash v. Conn., 16 Fla. 428; Flash v. Conn., 109 U. S. 371.
    Messrs. Edward F. Gorton and Edward W. Russell, for appellees.
    A statute imposing a liability on directors for creating an excess of indebtedness over capital stock is a penal one. Sturges v. Burton, 8 Ohio St. 215; Bank v. Price, 33 Md. 487; Kritzer v. Woodson, 19 Mo. 327; Irvine v. McKeon, 23 Cal. 427.
    Statutes are penal which impose a duty on directors to perform or which forbid the doing of certain acts contrary to public policy, and subject the director violating to pecuniary loss.
    Liability for corporate debts for failing to make required reports is penal. Merchants’ Bank v. Bliss, 35 N. Y. 416; Halsey v. McLean, 12 Allen, 438; Derrickson v. Smith, 3 Dutcher (27 N. J.) 170; Gregory v. German Bank, 3 Colo 332; Miller v. White, 50 N. Y. 137; Shaler Hall Co. v. Bliss, 3 Barb. 309; Duckworth v. Roach, 8 Daly 159; Breitung v. Lindauer, 37 Mich. 217; Steam Engine Co. v. Hubbard, 101 U. S. 192. For making false certificate that capital stock is paid in. Stebbins v. Edmonds, 12 Gray, 203. For making dividends which impair the capital stock. Hill v. Frazer, 22 Pa. St. 320. For making dividends when corporation is insolvent. Rooke v. Thomas, 56 N. Y. 559.
    Statutes are penal which impose a personal liability on stockholders for the debts of the corporation, for doing acts prohibited, or failing to do acts enjoined. For proceeding to business before paying up capital stock. Richardson v. Aiken 87 Ill. 138; Weidinger v. Spruance, 101 Ill. 278, followed in Junker v. Kulmen, 18 Ill. App. 478; Gridley v. Barnes, 103 Ill. 211; Diversey v. Smith, 103 Ill. 378. For failing to file certain certificates. Wiles v. Suydam, 64 N. Y. 173; Harper v. Union Mfg. Co., 100 Ill. 225. For failure to publish certain reports. Cable v. McCune, 26 Mo. 380.
    Appellees do not contend that any other question than the one of this liability being a penalty and barred in two years, comes before this court. As was before stated, the amended bill shut out all other questions raised by the demurrer to the original bill. And it is submitted that the answer to that question must be, that it is a statutory penalty. This being so, the court below committed no error in sustaining the demurrer and dismissing the bill for want of equity.
    Equity follows the law; acting by analogy, applies the statute of limitations. Lewis v. Marshall, 5 Pet. 470; Kane v. Harrington, 50 Ill. 239; Carpenter v. Carpenter, 70 Ill. 457; Hancock v. Harper, 86 Ill. 450; Castner v. Walrod, 83 Ill. 27; Manning v. Warren, 17 Ill. 267; Henry County v. Winnebago Drain Co., 52 Ill. 454. And may be taken advantage of by demurrer when facts showing that action is barred, appears on the face of the bill. Illett v. Collins, 103 Ill. 74.
   Gary, J.

The appellants filed a bill to enforce the liability of the appellees as directors and officers of a corporation named George H. Taylor & Company. Such liability is charged upon the ground that they consented to the creation of an indebtedness by the corporation exceeding the amount of its capital .stock, and so became liable for such excess under Sec. 16 of the act concerning corporations, approved April 18, 1872. The debts sued for were created in October, November and December, 1882, by promissory notes becoming due in March and April, 1883.

The bill was filed January 12, 1888—more than five years after the debts wer.e created, but less than five years after they became due. The bill alleges that when the debts were created and matured the excess existed.

A demurrer by the appellees to the bill was sustained and the bill dismissed, and from that decree this appeal was taken.

The causes assigned for the demurrer were two years’ limitation, on the theory that the liability was “a statutory penalty,” or if not, then five years, on the theory that the suit is a “ civil action not otherwise provided for.” The first ground of the demurrer will be passed with but slight consideration. There is no prohibition in the statute to the creation of an excess of indebtedness, but only a consequence declared if it is done. The ground upon which the Supreme Court held in Diversey v. Smith, 103 Ill. 378, and many other cases, that the liability of stockholders in insurance companies under the 16th section of the act of 1869 concerning insurance was a penalty, fails here, for they found in that act, by construction, a prohibition of the course of business from which the liability imposed by that section followed.

In Hornor v. Henning, 93 U. S. 228, it is decided that language substantially the same as that upon which this bill is framed did not impose a penalty, but was intended to create a fund for the greater security of creditors.

This case is cited with approval to support the position that the remedy is only in equity against all who are liable by or on behalf of all who are creditors, in Low v. Buchanan, 94 Ill. 76; and it is decided in Queenan v. Palmer, 117 Ill. 619, that equity has no jurisdiction to enforce penalties. It follows as a necessary conclusion from these last two cases (the remedy being in equity, and equity having no jurisdiction to enforce penalties) that this liability is not a penalty.

The second ground can not be disposed of so easily and satisfactorily. The argument for the appellants is that they could not sue before their debt was due, and that the statute does not begin to run before they could sue. On the other side it is urged that the appellants’ cause of action arises from the act of the appellees, and the limitation begins to run from the time the act was done. Manifestly both positions can not be correct, but the vice seems to be in the premise, or the conclusion, of the appellants.

If the appellants could sue the appellees only when they could sue the corporation, then it should follow that they might sue the appellees, their assent to excessive indebtedness concurring, so long as they might sue the corporation, and therefore if the corporate debts were by written instrument made before the excess of debt, on which an action would not be barred until the lapse of ten years, the appellants would be also liable for the unexpired residue of the ten years or more.

There is but one case cited, Duckworth v. Jones, 3 Daly, 159, in which a question resembling that arose, and it was there decided that the three years’ limitation of the right of action against the defendants as trustees of a corporation for failure to make a report required by statute did not begin to run when the cause of action accrued against the corporation, but when they failed to report. In that case, however, the debt was due before the default of the defendants.

The case cited from Yermont, Bassett v. St. Albans Co., 47 Yt. 313, only decides that the statutory liability is not kept alive beyond the term of limitation by a judgment against the company. 'It must be true that appellees would not be liable for debts barred as to the corporation, but this would be upon the ground that it is only to the creditors that they are liable, and if the debt is extinguished by limitation, collateral remedies are gone with it. Pollock v. Maison, 41 Ill. 516, a case of a mortgage, followed in Emory v. Keighan, 88 Ill. 482.

But in such case the lapse of time would not be operative as a limitation upon the action against the appellees, but would have the same effect as payrn ent or release of the debt. In the nature of things, whenever the cause of action did accrue against the appellees, it accrued as a whole—all at once—not piecemeal or by fragments. It may doubtless become greater, after it has once arisen, by further excess of indebtedness, to which there is an assent by the same officers.

Very grave inconveniences may be supposed from holding that no cause of action exists against the appellees until the debt is due. If the holder of a debt may not himself sue because his debt is not due, may he come in upon a bill filed on behalf of himself and all other creditors, by one whose debt is due, or must he stand by and see the fund which is for the benefit of all, divided among a few ? If no canse of action arises until the debt is due, then suppose a corporation of §50,000 capital, with indebtedness of the same amount, incurring, upon a credit of six months, a further indebtedness of §50,000. During the six months in which this last indebtedness is maturing the corporation pays the first §50,000 and in so doing exhausts its entire assets. If the later creditors could sue at once, when the excess is created, the whole §100,000 would be paid; half from .‘the assets of the corporation, the other half from the liability of . the officers. But if no cause of action arises until the later debt is due there is no excess then for the statute to attach to, and the later creditors get nothing. Or, suppose a case more likely to happen—that a corporation with some credit, and a capital stock of §50,000, owing to the officers’ friends, debts of §15,000 or §20,000, and as much more to other people, incurring new debts, upon a credit of some months, which make an excess equal to the friends’ claims, using the proceeds from the new debts and the assets of the corporation to pay the friends, and leaving all the other creditors, new and old, out, and there is the same unjust result, if the liability dates from the maturity of the new debts. The act of consent to an excess of indebtedness does not give a separate cause of . action to one creditor, but a collective one to, or for the benefit of all; those whose debts are incurred before the excess, as well as those whose debts caused it. Buchanan v. Bartow I. Co., 3 App. 191; Low v. Buchanan, 94 Ill. 76.

Can the position that whether a suit upon that collective cause of action is prematurely brought or not, depends upon which of the several creditors is the more active, be maintained ? Under the bankrupt act, the petition in case of involuntary bankruptcy, might be by a creditor whose debt was not due (Bump on Bky. 28), though the act of Congress simply said “petition of one or more of his creditors.” Ib. 403.

So in the administration of estates, whether of deceased persons or insolvents, by statute, claims not due are provable. Sec. 67, Ch. 3, Sec. 10, Ch. 72, R. S. 1872.

Proceedings of the character of this are the administration, in equity, by rules which the court in a great measure frames for itself, of a fund, to be apportioned among claims due and not due, as the case may be, and in principle it can make no difference which class embraces the creditor who first calls upon the court for aid.

The effort of appellants to show that this cause of action is some nondescript, not included in the words “not otherwise provided for,” has made no impression upon the court. The appellees have made no written instrument. Their liability was imposed by law for acts in pais. It ended with the lapse of five years after their last act ¡of consent to an excess of indebtedness.

The demurrer was rightly sustained, and the decree is affirmed. Schalucky v. Field, 124 Ill. 617, has no resemblance to this case.

Decree affirmed.