author: Mr. Presiding Justice Friend

text:
    City National Bank and Trust Company and Central Republic Trust Company, Appellants, v. Hubert Burnham, Appellee.
    Gen. No. 39,691.

      Heard in the second division of this court for the first district at the October term, 1937.
    Opinion filed November 17, 1938.
    Rehearing denied December 7, 1938.
    Bell, Boyd & Marshall, of Chicago, for appellants; Thomas L. Marshall, David A. Watts and Victor M. Harding, Jr., all of Chicago, of counsel.
    Sonnenschein, Berkson, Lautmann, Levinson & Morse, of Chicago, for appellee; Isaac E. Ferguson, Charles E. Zekas and Homer Kripke, all of Chicago, of counsel.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

Plaintiffs brought four law suits upon an instrument of guaranty by which thirteen individuals, including defendants Hubert Burnham, William H. Emery, Walter S. Boss and Daniel H. Burnham, severally guaranteed the principal, interest and carrying charges of a $1,600,000 real estate mortgage bond issue, of which $1,402,500 of bonds remain outstanding and in default. In each of the four cases, City National Bank & Trust Company, Chicago, trustee, was plaintiff, and Central Republic Trust Company, trustee, joined as alternative plaintiff. This case against Hubert Burnham, Gfen. No. 39,691, was consolidated for hearing with causes numbered 39,692, 39,693 and 39,694 and they were tried before the court without a jury, resulting in judgment for the defendant in each case. Plaintiffs appealed from the several judgments and during the pendency of the appeals an order of consolidation was here entered in each case.

Although the record is quite voluminous, consisting principally of documents and writings, the evidence is not in conflict. It appears that some thirteen individuals, who later issued the bonds and guaranty herein, held an option to purchase from the Palmer estate the vacant unimproved lot south of the Palmolive building in Chicago, bounded by Michigan avenue, Delaware place and Chestnut street. This option was exercised on December 28, 1928, and title was taken by Chicago Title & Trust Company under a trust agreement of that date, described as No. 22114, Michigan, Delaware-Chestnut Realty Trust, which showed as beneficiaries thereof the individuals who later executed the bonds and guaranty sued on herein. Part of the consideration for exercise of the option was obtained by temporary loan of $1,500,000 from Central Trust Company of Illinois, and the note evidencing the loan was signed by Chicago Title & Trust Company, as trustee, and not personally. A written several guaranty was affixed to the note, executed by the individual beneficiaries, who later executed the guaranty herein and in substantially the same percentages. Also December 28, 1928, an underwriting agreement was executed between Central Trust Company of Illinois and the trust, whereby the bank undertook to purchase, at 96%, the 6 per cent real estate mortgage bonds to be dated January 1, 1929, and payable January 1, 1932, in the aggregate amount of $1,600,000, the principal, interest and carrying charges to be severally guaranteed by the beneficiaries of the trust in the respective percentages later appearing upon the guaranty, which was executed when the bonds were issued. The trust deed,“bonds and guaranty were executed and issued as contemporaneous documents January 1, 1929, and the underwriter paid the money upon the bonds after the executed guaranty had been delivered to the trustee and after each guarantor had furnished a written statement of his financial responsibility. The temporary note was paid from the proceeds of the underwriting, and the underwriter through its various group representatives sold the bonds to the public.

The bonds issued in the aggregate sum of $1,600,000, bearing interest at the rate of 6 per cent, dated January 1, 1929, and due three years thereafter, contained no provision for any sinking fund. They were executed by the Chicago Title & Trust Company, trustee, and expressly exempted the trustee and each beneficiary of the trust from liability upon the bonds, with only .one exception, namely, that the guaranty should constitute an express assumption, to the extent thereof, of liability upon the bonds.

The material provisions of the guaranty, which refers in detail to the bonds, “this day executed,” and to the mortgage securing them, reads as follows: “Now, Therefore, in consideration of the premises and of the purchase and acceptance of said bonds by the holders thereof, and for value received, each of the undersigned hereby severally and not jointly nor any one for the other, agrees to pay to Central Trust Company of Illinois, as trustee of an express trust for the benefit of the holders from time to time of said bonds, the proportion set opposite his name of the interest payable upon said bonds from time to time outstanding and of all taxes, assessments and other carrying charges as said term is defined in said mortgage deed of trust as and when the same become due and payable and each of the undersigned unconditionally waives all notice of non-payment or default, demand, presentment, protest or notice thereof and acceptance of this guaranty, and each accepts all of the provisions of said bonds and said mortgage deed of trust, and each authorizes the Mortgagor, without notice to him, to obtain any extension or extensions thereof, and each severally agrees in case of non-payment by him when due of his proportionate part of the payments so severally guaranteed, that suit therefore may be brought by Central Trust Company of Illinois, in its own name and as trustee of an express trust, as aforesaid, for the benefit of the holders of said bonds against him severally at the election of said Central Trust Company of Illinois, Trustee, whether or not suit has been commenced against the Mortgagor and that in any such suit the Mortgagor need not be joined, at the option of said Central Trust Company of Illinois, Trustee, and further severally agrees in the event of such suit, to pay the costs and reasonable attorneys’ fees incurred by said Trustee therein. Said payment is severally guaranteed in the following proportions: . . . ” To this guaranty there were affixed thirteen signatures, including the four defendants, opposite whose names appear the following percentages of their undertaking: Walter S. Ross, 10 per cent; Daniel H. Burnham, lYs per cent; Hubert Burnham, 1 Yz per cent; and William H. Emery, 2 per cent.

The guaranty then continues as follows: “And for the considerations aforesaid, each of the undersigned severally and not jointly nor any one for the other agrees to pay to Central Trust Company of Illinois, as trustee of an express trust for the benefit of the holders from time to time of said bonds, the proportion set opposite his name, of the payment of the principal of said bonds outstanding and of all money payments other than interest, taxes, assessments and other carrying charges as above stated, as and when the same become due and payable and each of the undersigned unconditionally waives all notice of non-payment or default, demand, presentment, protest or notice thereof and acceptance of this guaranty, and each accepts all of the provisions of said bonds and said mortgage deed of trust, and each authorizes the Mortgagor, without notice to him, to obtain any extension or extensions thereof, and each severally agrees in case of non-payment by him when due of his proportionate part of the payments so severally guaranteed, that suit therefor may be brought by Central Trust Company of Illinois, in its own name and as trustee of an express trust, as aforesaid, for the benefit of the holders of said bonds against him severally at the election of said Central Trust Company of Illinois, Trustee, whether or not suit has been commenced against the Mortgagor and that in any such suit the Mortgagor need not be joined, at the option of Central Trust Company of Illinois, Trustee, and further severally agrees in the event of such suit, to pay the costs and reasonable attorneys’ fees incurred by said Trustee therein. Said payment is severally guaranteed in the following proportions: . . .” Affixed to the foregoing are eleven signatures, including the four defendants, as follows: Walter S. Boss, 30 per cent; Daniel H. Burnham, lfz per cent; Hubert Burnham, 1% per cent; and William H. Emery, 2 per cent.

Interest and taxes were regularly paid through the year 1931 as they became due, but in December, 1931, it became apparent that although the interest would be paid in January, 1932, principal then to become due , would not be paid, and Central Bepublic Bank & Trust Company, a consolidation of Central Trust Company of Illinois, and Chicago Trust Company, advised the holders of bonds by letter of the impending default in principal. A bondholders’ committee was thereupon organized and three individuals, Louis H. Schroeder, Edward J. Costigan and Jay N. Whipple, assumed to act as the committee. Schroeder was vice president of Central Bepublic Company, Costigan was president of the Whitaker Company of St. Louis, distributor of $500,000 of the bonds, and Whipple was a member pf Bacon & Whipple, who had distributed some $200,000 of the bonds. They were interested because they had sold the bonds to their customers, and served as a committee without compensation.

As a result of negotiations with Vincent Bendix, the largest guarantor, a plan of reorganization was devised and three documents, bearing date January 11, 1932, were drawn and executed in pursuance of the plan, as follows: (1) A depositary agreement between the committee and Central Bepublic Bank & Trust Company, Depositary, Article 1 of which set forth the plan of reorganization in detail; (2) a printed letter from the committee to the bondholders, soliciting deposit of the bonds, requesting the bondholder upon depositing his bonds to execute a document by which he expressly consented to the depositary agreement and plan of reorganization; and (3) a contract between the committee and Bendix, making the depositary-agreement a part thereof and providing the mechanics for obtaining deposit of bonds, payment of expenses, etc.

In Article 1 of the depositary agreement, dated January 11,1932, the plan of reorganization is outlined, as follows: That Bendix had at the outset paid the defaulted coupons and that he would pay the committee’s expenses and also $160,000 for purchase and retirement of bonds as soon as the committee should declare the plan effective, as defined in section 8 of article 1; that the old bonds, which provided for no sinking fund, were to be exchanged for new bonds, providing a sinking fund of $720,000 to be used for retirement of bonds, to be paid in semiannual instalments of $80,000 each, commencing July 1, 1932, and efficacy was to be given to this provision by personal guaranty of the bonds by Bendix; that a new first mortgage and a new title guarantee policy were to be furnished, and Bendix, who was designated as the new guarantor, was personally to execute a written guaranty of principal, sinking fund, interest and carrying charges; that the old first mortgage and the old several guaranty were to be released and discharged when and if the new bonds, so secured by new mortgage and supported by the new guaranty, should be delivered to the depositary, after approval by the committee.

Pursuant to the execution of the depositary agreement on January 11, 1932, by the committee and the Central Republic Bank & Trust Company, the committee ’s printed letter of that date informed the bondholders of the salient features of the plan, and on the second and third pages of the letter, article 1 of the agreement was printed in full. It was suggested in the letter that copies of the entire depositary agreement were available to bondholders upon specific request. In pursuance of this letter the bondholders deposited their bonds with the depositary, at the same time signing an acceptance of and consent to the provisions of the agreement.

The agreement of January 11, 1932, between the committee and Bendix, to which the depositary agreement was attached, contained various provisions similar to those of the depositary agreement, showing the difference between declaring the plan effective and consummating the plan or making it finally effective by the delivery of new bonds to the depositary, and providing that only upon the delivery of new bonds were the old mortgage and old guaranty to be released. Among the provisions of this agreement appear the following: “When and if the Committee shall declare the Plan effective subject only to the receipt of the new bonds as provided for in the depositary agreement, the new Guarantor agrees to deposit, within three days ... an additional sum equivalent to one per cent of the aggregate principal amount. . . .

“In the event the Committee shall declare the Plan conditionally effective, the new Guarantor will deposit from time to time such further sums as shall be necessary to make available to the Committee sufficient funds for compensating dealers as aforesaid in connection with bonds deposited after the Plan shall be so declared conditionally effective, . . . shall not exceed three per cent of the aggregate principal amount of additional bonds so deposited.

“In the event the Plan shall be abandoned the Committee shall return to the new Guarantor any of such deposits not previously used or then required for the foregoing purposes. ... If the Plan shall become finally effective, any of such deposits not required for the foregoing purposes shall likewise be returned to the new Guarantor.

“If the Plan shall not become finally operative the new Guarantor shall pay only the expenses and fees aforesaid incurred in attempting to carry out the Plan. . . . ”

Subsequently, on April 9, 1932, the committee wrote to Bendix, calling attention to section 3 of the depositary agreement, and requesting that he place with the depositary on or before April 15, 1932, $160,000, plus an additional $5,000 for the purpose as stated in section 3, and advising him as follows: “There have now been deposited with the Depositary more than 90 per cent of said First Mortgage Bonds issued and outstanding. Immediately upon the deposit with the Depositary of the aforementioned sums and the payment of the other expenses and liabilities of the Committee, in accordance with your previous agreements, the Committee will declare the plan conditionally effective as therein provided for. This notice and request is given in accordance with the terms of said Depositary Agreement and is not to be taken or construed as an amendment or waiver of any rights given the Committee by said Agreement or by the contract dated January 11, 1932, between you and the Committee.”

At the same time the committee wrote a similar letter, requesting payment of various expenses undertaken by Bendix in the agreement of January 11, 1932. Apparently in response to these communications, Cassels, Potter & Bentley, on April 15, 1932, sent to Schroeder, chairman of the bondholders’ committee, a check of Vincent Bendix for $164,578.99, and another check of Winston, Strawn & Shaw for $25,319.85, constituting payment of $160,000 and other items mentioned in the two letters of April 9. Following the receipt of these two checks, the committee, April 15, 1932, sent a letter to the bondholders, the material portions of which read as follows: “The Deposit Agreement dated January 11,1932, containing the Plan of Reorganization with respect to the above Bonds, a part of which was sent to you with the Committee’s communication of January 11, 1932, provides that the Plan may be declared conditionally effective by the Committee when it, in its discretion, shall determine, subject to the conditions: (1) that not less than 90 per cent in amount of the Bonds shall have been deposited; (2) that $160,000 for the purchase of Certificates of Deposit, plus an additional sum sufficient to pay accrued interest at the rate of 6 per cent per annum upon Bonds represented by the Certificates purchased, shall have been deposited with the Depositary; and (3) that it shall then appear to the Committee that the other terms and conditions of the Plan will be carried out within a reasonable time.

“The Committee is pleased to inform you that at this date more than 90 per cent in amount of the Bonds have been deposited, and that there have been deposited with the Depositary the sums of money referred to above. It appears to the Committee that the other terms and conditions of the Plan will be carried out within a reasonable time, and the Committee has accordingly declared the Plan conditionally effective.” The letter also outlined the mechanics of the tender of certificates of deposit by any bondholder who wished to sell, availing himself of the $160,000 fund for purchase of bonds. Considerable time elapsed after the letter of April 15, 1932, to the bondholders, during which the purchase of certificates of deposit and bonds was effected, and finally, November 12, 1932, the trustee formally canceled $197,500 of bonds so acquired, reducing the outstanding bond indebtedness to $1,402,500.

At a meeting of the committee, held May 23, 1932, Louis H. Schroeder, chairman, advised its members that of the $1,600,000 bonds outstanding, approximately $1,525,000 in amount had been deposited under the terms of the depositary agreement of January 11, 1932, and the plan of reorganization contained therein; that the conditions set forth in section 8 of article 1 of the depositary agreement had been fulfilled, that the terms of the plan could be carried out within a reasonable time, and that in view of these facts it appeared for the best interests of the depositors to declare the plan effective. Mr. Costigan, another member of the committee, thereupon offered a resolution, which was unanimously adopted, the preamble of which recited that substantially more than 90% in amount of the outstanding bonds had been deposited under the terms of the agreement; that the conditions precedent to declaring the plan effective, as set forth in sec. 8 of Article 1 of the depositary agreement had been fulfilled, and that it appeared to the committee that the plan could be consummated within a reasonable time. It was therefore ‘ resolved, by the members of said Committee that the plan of reorganization set forth in Article 1 of said Depositary Agreement dated January 11, 1932, be, and it hereby is declared effective.” A certified copy of the foregoing resolution was mailed to Messrs. Cassels, Potter & Bentley, attorneys for Bendix, May 24, 1932.

Subsequently, June 15, 1932, Bendix forwarded a letter to the committee, wherein he called attention to the plan for reorganization by which the principal for a new issue of bonds was to be guaranteed by him and which also provided that he was to pay on demand $160,000 cash for reduction of the old issue, and to make sinking fund payments in the amount of $80,000 every six months, beginning July 1,1932. He said that unforeseen and serious changes for the worse had taken place since January, marked by a drastic decline in the market value' of securities, seriously impairing the current liquid position of nearly everyone and that in view of the changed economic conditions he did not think the plan feasible and sound, and was therefore moved to propose that the issue be placed upon a sounder basis by eliminating the first four sinking fund payments and increasing the remaining payments to a total of $500,000, payable in semiannual instalments of $100,000, beginning July 1, 1934. He called attention to the fact that he had already invested more than $730,000 in this enterprise, and was confident that if the plan were modified in the manner suggested in his letter, and otherwise remain unchanged, that the issue could be kept in good standing.

By letter of June 30, 1932, the committee passed on to the bondholders the information and proposal contained in Bendix’s letter, and advised them that the interest due July 1 in accordance with the terms of the plan as outlined in the depositary agreement would not be available, for the following reasons: “Recently the Committee was advised by Mr. Vincent Bendix, the proposed new guarantor under the plan, that the plan could not be carried out without a modification of the sinking fund provision. The Committee has been in constant touch with Mr. Bendix and his representatives with reference to the proposed modification and hopes to be in a position within the next few days to give the bondholders additional information.”

On the same, day the committee advised Bendix that they would submit the proposed modification as outlined in his letter of June 15th to holders of certificates of deposit for their approval, upon conditions which may be summarized as follows: (1) that Bendix and Amos C. Miller (another guarantor) agree to place the mortgaged property in escrow, so that it will be readily available in the event of default; (2) Amos C. Miller to guarantee new bonds to the same extent that he was guarantor of the old bonds; (3) that the non-deposited bonds ($72,500) be acquired by Bendix and placed in escrow to be available for sinking fund; (4) that all expenses of the committee be paid prior to submitting the modified plan to holders of certificates of deposit; (5) that $270,000 of acceptance collateral be deposited by Bendix as security for his guaranty. Apparently these suggestions were not accepted by Bendix and no modified plan was then adopted between the committee and Bendix. Consequently no proposal for modification of the original plan was then submitted to the bondholders.

Thereafter many conferences ensued and various suggestions were made for modification of the plan. As the matter stood at the close of June, 1932, there were no new bonds, no new mortgage, no new title guaranty policy, and no new guaranty, and the plan of reorganization provided in the depositary agreement of January 11, 1932, proceeded no further after Bendix’s letter of June 15. On the old bonds which remained, there was a default in interest due July 1,1932, and the status of the matter was continued until October 8, 1932, when a modified plan was adopted.

This modified plan was evidenced by an agreement, dated October 8, 1932, between the committee on the one hand, and Vincent Bendix and Amos 0. Miller on the other, and was participated in by Edgar J. Uihlein, another guarantor. By letter of the same date the bondholders were informed by the committee of the detailed changes in the plan, and notified that any bondholder who did not acquiesce in the modifications was privileged to withdraw his bonds from the depositary. The material changes in the plan, as appearing from the committee’s letter to the bondholders, may be summarized as follows: (1) the then outstanding bonds were to be extended, not refunded, for a period of five years from January 1, 1932; (2) Bendix was to agree to pay the principal and interest on all bonds, as well as taxes and other carrying charges when and as such payments should become due, if they were not otherwise made; (3) Edgar J. Uihlein was to be released of all his liability upon his guaranty, in consideration of substantial cash payments to be made by him at the time the plan, as proposed to be modified, should become finally effective; (4) Amos 0. Miller was likewise to be released of liability upon his guaranty of interest payments and carrying charges, in consideration of cash payments to be made by him at the time the plan, as modified, should become finally effective; (5) an agreement was to be entered into by Bendix and Miller, whereby Bendix would undertake to the extent of 93% per cent and Miller to the extent of 6% per cent, to pay to the trustee $80,000 on January 1, 1935, and a like amount each July and January first thereafter until and including July 1, 1936; such payments to be used by the trustee for the purchase of bonds in the open market, preference to be given to bonds offered at the lowest prices, and Miller should receive credit for any such payments made by him upon his guaranty of 6% per cent of the principal of the bonds; (6) a provision reserving all rights against all the old guarantors, except as otherwise stated in the proposal. The committee’s letter advised the bondholders that the effect of the plan with the proposed modification would give depositors extended bonds, with interest and carrying charges paid or provided for up to and including January 1,1933; that the lien upon the mortgaged property would continue as theretofore, and no existing guaranties would be released except those of Uihlein and Miller; that in addition to the existing guaranties, and as further security for bondholders, there would be a guaranty by Bendix of all principal, interest and carrying charges, and that the bondholders would also have the benefit of the agreement of Bendix and Miller to provide regular semiannual payments from and after January 1, 1935, for the retirement of bonds.

The substantial cash payments by Uihlein, contemplated in the modified plan of October 8, 1932, in consideration for which he was to be released from his guaranty, were provided for in the agreement of that date, as follows: Bendix and Uihlein had made an agreement on September 30, 1932, whereby the latter was to advance to Bendix $150,000, part of which was to be placed in escrow for the acquisition of the $72,500 bonds which had not been deposited with the depositary, and the balance to be available for performance of Bendix’s commitment in the October 8, 1932, agreement, together with an additional $30,000 which Uihlein undertook to lend to Bendix.

The consideration by Miller for release of his guaranty of 6% per cent of the interest and carrying-charges was shown by the modified plan to be $9,466.67 cash.

The modified plan of October 8, 1932, provided for utilization of funds obtained, to pay $34,000 upon 1930 general taxes, July 1, 1932, and January 1,1933, interest instalments, as well as costs and expenses.

With reference to the new guaranty to be furnished by Bendix, the agreement contained the following provision: “Such additional guaranty of Bendix shall be in the form of a guaranty of payment by the remaining old guarantors of their obligations when and as due, or a direct guaranty of the payment of the principal of, interest on, and carrying charges in connection with all of said bonds now outstanding, when and as due, or part in the former and part in the latter form, as shall be determined by the Committee, but in any event is not to be, to any extent whatsoever, a substitution for any of the old guaranties none of which are to be released except as otherwise specifically provided hereunder or under the terms of the modified Plan.” (Italics ours.)

The modified plan became effective November 15, 1932, when Central Republic Bank & Trust Company executed a formal release to Amos C. Miller of his guaranty of interest and carrying- charges (but not releasing him from his guaranty of principal), the concluding paragraph of which reads as follows: “It is understood and agreed, however, that General Republic Bank & Trust Company, as Trustee, expressly retains and reserves all rights which it or the holders from time to time of said bonds have or could have against all other parties who executed said guaranties, or either of them, except such of said parties as shall be expressly released by the Trustee.” Also, on November 15,1932, Central Republic Bank & Trust Company executed a similar document releasing Uihlein from his guaranty of principal, interest and carrying charges, and on the same date Vincent Bendix exe- ' cuted a full guaranty of principal, interest and carrying charges, the final paragraph of which reads as follows: “It is expressly understood that this guaranty of payment is given as additional security for the payment of the principal of, interest on and carrying charges with respect to said bonds and is not to be a substitution for any of the obligations of any other per'son or persons under any existing guaranties or agreements.” At the same time an extension agreement was executed between Chicago Title & Trust Company, as trustee, and Central Republic Bank & Trust Company, as trustee, reciting the releases granted and providing that the bonds were extended from January 1, 1932, to January 1, 1937. Pursuant to the expressed provisions of the extension agreement, a legend, printed on each bond, stated that the maturity of the bond had been extended in accordance with the agreement, and that Edgar J. Uihlein had been and was released from his guaranty of the principal of and interest on the bonds and from his guaranty of all taxes, assessments and other carrying charges and of all other payments whatsoever; also that Amos C. Miller had been and was released of his guaranty of interest on the bonds and of all taxes, assessments and other carrying charges; and that ‘ ‘ the liability of all other guarantors has been and is expressly reserved.” (Italics ours.) It also appears from the preamble of the extension agreement that Uihlein had been released from all liability upon his guaranties with respect to the bonds and that Miller had likewise been released from all liability from his guaranty of interest and carrying charges with respect to the bonds, in consideration of the cash payments made by them respectively for the use and benefit of bondholders, and that these releases were given “with express reservations of the rights against all other guarantors..” (Italics ours.)

November 21, 1932, the committee requested bondholders to present their certificates to the depositary and to withdraw the extended bonds, saying “we take pleasure in advising you that the plan, as modified in accordance with the terms of such letter, has now been declared finally effective.” They were also told that there had been deposited with Central Republic Bank, as trustee, funds sufficient for payment of the July 1, 1932, and January 1, 1933, interest coupons, and that holders were at liberty to collect the same immediately. The bondholders’ committee, consisting of Schroeder, Costigan and Whipple, thus ended its work and disbanded. However, another default occurred July 1, 1933, and thereupon, July 25, 1933, a second committee was organized, consisting of J. Sanford Otis and Edward J. Costigan. Later Charles Aaron joined the committee. A. second depositary agreement was executed in July, 1933, but no further reorganization has been effectuated. Since July, 1933, substantial defaults have occurred in the payment of principal, interest and taxes.

In November, 1932, the Central Republic Bank & Trust Company changed its name to Central Republic Trust Company. In 1934 William L. O’Connell was appointed receiver of the Central Republic Trust Company, and in May, 1935, the trustee resigned its trust, effective August 5, 1935. The trust indenture provides that a successor trustee may be named by a majority in amount of the outstanding bonds. Following resignation of the trustee, the second bondholders’ committee took title, under the depositary agreement, to the bonds then on deposit, and united with other groups and individuals holding bonds, in naming City National Bank & Trust Company as successor trustee. The latter accepted the trusteeship in September, 1935. April 3, 1936, the new trustee, in view of the interest defaults, aggregating approximately $250,000, and other defaults, accelerated the maturity of the principal and demanded payment thereof, and shortly thereafter instituted these proceedings. Upon the execution of an indemnity agreement by the committee to Central Republic Trust Company and its receiver, the latter, with authority from the receiver, joined as alternative plaintiff in each of the four suits.

From a summary sheet introduced in evidence it appears that March 1, 1937, the total interest on the defaulted bonds amounted to $409,147.50, total taxes in arrears $176,447.80, principal due $1,402,500, thus aggregating $1,988,095.30. After allowing credit for balance of cash in the hands of the trustee as of February 24, 1937, the liabilities of the four defendants for carrying charges were shown to be as follows: Walter S. Ross, at 10 per cent — $58,122.23; Daniel H. Burn-ham, at 1% per cent — $9,686.65; Hubert Burnham, at lyí per cent — $9,686.65; William H. Emery, at 2 per cent — $11,624.45. The liability of these four defendants for principal is indicated as follows: Walter S. Ross, at 30 per cent — $417,608.76; Daniel H. Burnham, at í2/z per cent — $23,200.48; Hubert Burnham, at 1% per cent — $23,200.48; William H. Emery, at 2 per cent — $27,840.58. The total liability of these four defendants for carrying charges and principal is indicated as follows: Walter S. Ross — $475,730.99; Daniel IT. Burnham — $32,887.13; Hubert Burnham— $32,887.13; William H. Emery — $39,465.03.

Defendants take the position that they were discharged as guarantors by force of the Committee-Bendix agreement of January 11, 1932, and the things done in performance thereof, and the court so held. The argument in support of this contention is based on the premise that the agreement of January 11, 1932, between the Committee and Bendix, gave defendants a third-party benefit which in effect released them from their old obligations as guarantors, and that after payment by Bendix of a substantial cash consideration under the agreement, and the performance by him of the promise upon which its effectiveness was conditioned, the third-party benefit under the agreement became vested. The fallacy of this argument, as we view it, is that the defendant guarantors were not parties to the agreement, but beneficiaries thereunder, and, as such, they were bound by the contract as written, and if the contracting parties, namely, the Committee and Bendix, had agreed that the old guarantors were not to be released until the plan was finally consummated by the delivery of new bonds, new guaranty and a new mortgage, the guarantors were not entitled to be released until the conditions of the agreement, made for their benefit, were carried out as written. Professor Williston, in his treatise on Contracts (1st Ed.), vol. 1, sec. 394, says the rule upon which the rights of third persons are founded, is as follows: “The foundation of any right the third person may have, whether he is a sole beneficiary or a creditor of the promisee, is the promisor’s contract. Unless there is a valid contract no rights can arise in favor of any one. Moreover, the rights of the third person, like the rights of the promisee, must be limited by the terms of the promise. If that is in terms conditional, no one can acquire any rights under it unless the condition happens.”

The Supreme Court of this State has announced the rule m substantially the same terms. In Carson Pirie Scott & Co. v. Parrett, 346 Ill. 252, at p. 258, the court pointed out that the right of the third party benefited by a contract to sue thereon rests upon the liability of the promisor, “and this liability must affirmatively appear from the language of the instrument when properly interpreted and construed. The liability so appearing can not be extended or enlarged on the ground, alone, that the situation and circumstances of the parties justify or demand further or other liability.”

Under the clear language of section 10, article 1, of the original plan of reorganization, which was made a part of the agreement of January 11,1932, the guarantors were not to be released until new bonds providing for a sinking fund, to begin July 1, 1932, and the new guaranty, were duly executed and delivered to the depositing bondholders, and these conditions were never fulfilled. Defendants seek to escape from the provisions of the agreement of January 11,1932, by arguing that the time specified for release of the old guarantors was the time of delivery of the new bonds and the new 100 per cent guaranty by Bendix, and that the substitution of “old bonds, extended” for “new bonds,” under the supplementary agreement of October 8, 1932, was in effect a consummation of the prior agreement of January 11th. They say that the supplementary agreement preserves every feature of the original agreement, excepting only the first five of nine semiannual sinking fund deposits of $80,000 each, leaving in force the four $80,000 deposits, beginning July 1, 1935, and that as against the cancellation of the five earlier sinking fund deposits, the bondholders had the benefit of reduction of the mortgage indebtedness from $1,440,000 to $1,402,500, and payment, or provision therefor, of all interest and carrying charges to and including January 1, 1933. Under the original plan Bendix was to pay, not only the defaulted interest coupons maturing January 1,1932, and the sum of $160,000 to be used for purchase of bonds or certificates of deposit, but also $720,000 to the sinking fund for bond retirements, and if the latter sum had been paid by Bendix as contemplated under the original plan the sinking fund would have reduced the principal of the outstanding bonds from $1,402,500 to $682,500. This was a substantial provision, made for the benefit of bondholders, and it was because of Bendix’s inability or failure to comply with this provision that no new bonds were delivered to the depositary, that no personal guaranty of any such bonds was executed, and that the plan was not consummated. Thereafter, interest due, in excess of $40,000, was not paid July 1, 1932, and the entire principal remained in default. Under the original plan there was to be a new trust deed, with a new title guarantee policy, and there having been no one to assume liability for the bonds the new trust deed and title guarantee policy were not even considered. The guaranty of the bonds by Bendix under the original plan was not signed for the reason stated in his letter of June 15, 1932, that he could not meet the sinldng fund obligations to be incorporated in the new bonds. All that Bendix did was to pay the interest January 1, 1932, and the sum of $160,000 to reduce the principal indebtedness. Nothing was done respecting the $1,402,500 of bonds which remained outstanding, and these remained in default subsequent to July 1, 1932. It thus seems clear that the condition precedent to the release of the guarantors was not fulfilled, and the plan was, in effect, then and there abandoned. The modified plan, which followed in October, 1932, was, in our opinion, a new and separate undertaking.

Defendants stress the resolution of the committee on April 15, 1932, wherein it was announced that the plan had become “effective” by reason of the deposit of $1,525,000 of bonds, under the terms of the depositary agreement of January 11, 1932, and the fulfillment of the conditions set forth in section 8 of article 1 thereof. They say the condition was solely the issuance of new bonds, an obligation already unequivocally and unqualifiedly assumed by Bendix under the agreement, which was never abandoned but rather confirmed by the supplementary agreement of October 8, 1932, and that defendants and the other guarantors were at that time released. The trial judge evidently adopted this theory, because in his oral opinion he said: “They got in over 90% of the bonds, and on about February 15th, I think it was, it was conditionally effective, and on May 23rd, they said it was finally effective, and that all that was to be done was to finish this by issuing of new bonds, and that they would release the old guarantors. That was a matter to be worked out by attorneys. ...” Manifestly the court was in error in finding that the committee had declared the plan finally effective May 23, 1932, because the minutes of the committee as of that date, showing the resolution adopted at the meeting, specifically refers to the conditions precedent to declaring the plan effective as set forth in section 8 of article 1 of the depositary agreement, and the preamble to the resolution, showing that substantially more than 90 per cent in amount of the outstanding bonds had been deposited, is followed by the resolution that the plan “is declared effective.” The resolution did not declare the plan finally effective, as the court said, but merely cited, the precise section of the depositary agreement under which the committee was acting in making that declaration. Section 8 is not the section of article 1 which deals with the declaration of the plan finally effective. The declaration under section 8 is but preliminary and conditional. Section 10 of article 1 clearly provides that in the event the committee shall declare the plan effective “as provided for in sec. 8 of Article 1,” such declaration shall be conditioned upon the receipt of the new bonds by the depositary and the approval thereof by the committee within such time thereafter as the committee, in its sole discretion, shall deem reasonable, and explicitly states that “the plan shall not be deemed to be finally effective until said bonds are so received and approved, and until that time the depositary shall not be deemed to have released any of their rights in the security of the trust deed dated January 1, 1929, or of the old guaranties.” It therefore seems reasonably certain that the committee had in mind both sections 8 and 10 of article 1 when the resolution was drafted and passed.

It would seem that the court, in reaching its conclusion, also overlooked article X of the agreement of January 11, 1932, between the committee and Bendix, the principal guarantor. This article provides that “Promptly upon the delivery of the new bonds to the Depositary and the execution and delivery of said new guaranty to the Trustee under the Trust Deed, the Committee shall take such appropriate action as it shall be advised by its counsel it has the legal right to take to release the old Guarantors . . . .” It is conceded, of course, that neither the trustee, the bondholders’ committee, nor the bondholders ever executed a release to any of the four defendants, nor did any of them ever request a formal release. The committee took no “appropriate action” with reference to the release of defendants, except to reaffirm that the guaranty by Bendix was not to be a substitution for the obligations of any other persons under existing guaranties and it was not until suits were instituted that the defenses of release were interposed.

Defendants further argue that they had a vested interest in the original plan, because Bendix had paid $160,000 April 15, 1932. However, the agreement of October 8,1932, between the committee, Bendix, Miller and Uihlein, presented a modified plan which was founded upon this accomplished reduction in the outstanding bonds, and the depositary agreement in section 10 of article 1 expressly provided for the contingency of abandonment of the original plan after payment of $160,000.

It is next urged that defendants were discharged as guarantors because the extension agreement, to which all the bonds were subjected, changed the terms of the primary contract in a manner adding to the obligations of the mortgagor. This contention is based upon a clause in the extension agreement which provides, in effect, that in the event of a failure to pay the interest on the bonds when due, in the manner set forth in the trust deed, or to perform all or any of the covenants therein contained, then the whole of the principal shall become due and payable, together with all accrued interest thereon, “in the same manner” as if an extension had not been granted, anything contained in the trust deed or the bonds to the contrary notwithstanding. It is argued, in other words, that the original trust deed called for interest at 6 per cent until maturity, and 7 per cent after maturity; that the extension agreement also provides that the bonds shall bear interest at 6 per cent prior to maturity, but that in the event of an interim default by the mortgagor the entire principal and all accrued interest shall become due and payable, “in the same manner as if said extension had not been granted, anything herein or in said bonds to the contrary notwithstanding”; and thus, under the original contract the accrual of interest at 7 per cent upon default prior to final maturity of the principal, depended upon acceleration and then ran only from the date of acceleration, whereas under the extension agreement the commencement of interest at 7 per cent, upon default, was automatic and related back to January 1, 1932. We think this contention is untenable, for the following reasons: The reasonable interpretation of the provision that the bonds could be accelerated upon default and the interest rate increased to 7 per cent, “in the same manner,” does not necessarily mean “payable in the same amount,” but even if defendants ’ interpretation were to be adopted, nevertheless the original obligation was not enlarged beyond the authorization to extend as contained in the guaranty agreement. The trust deed provided for 6 per cent interest on the bonds up to January 1, 1932, and 7 per cent thereafter, and the extension agreement did nothing more than defer the obligation to pay any 7 per cent interest that had accrued to the time when default should occur with respect to the newly extended bonds and to project the principal obligors’ liability to pay 7 per cent interest into the future. Moreover, plaintiffs claim interest at 7 per cent only from April 3, 1936, the date of acceleration, and this defendants admit. The law of suretyship is well settled that where a creditor expressly reserves his rights against the surety, at the same time that he agrees with the principal to an extension of the contract, or even to a release of the principal, the surety will not be released. (Mueller v. Dobschuetz, 89 Ill. 176; IV Williston on Contracts [Revised Ed.] sec. 1230.) The extended bonds in this proceeding, as well as the extension agreement, provided in effect that the liability of all other guarantors was expressly reserved.

The remaining contention urged in support of the judgment is that neither plaintiff has the requisite interest or capacity to maintain these suits. It must be conceded, of course, that City National Bank & Trust Company became successor trustee under the trust deed and bonds, and was therefore entitled to assert any rights and remedies thereunder as trustee on behalf of the bondholders. It is urged, however, that City National Bank & Trust Company did not become entitled to sue upon the guaranty because that instrument, considered separately and apart from the trust deed, contains no provisions for succession of trustee. This contention overlooks the fact that the guaranty was executed contemporaneously with the execution of the bonds, and therefore constitutes an original obligation supplemental to and a part of the bonds. Although termed a guaranty, the instrument sued on is really a complete assumption of the principal debt, and constitutes the only personal liability upon that debt; in fact, the guarantors were the very persons who, through their trust, organized solely for this financing, obtained $1,600,000. It was therefore their obligation, and by means of the guaranty they kept their names off the bonds and appointed a trustee who acted for them without any personal liability. Thus, the obligation of the guarantors was the undertaking to pay their own debt, and they severally assumed liability for payment of the bonds and interest thereon and for carrying charges as provided by the trust deed.

There is also a sufficient showing of authority from the receiver of Central Republic Trust Company to join as coplaintiff. After a receiver was appointed for the Central Republic Trust Company, his right to join in the suit grew out of his duty to administer trusts before disposing of them. The law is now well settled in this State that the trust persists even though the bank be in receivership. We so held in People ex rel. Barrett v. West Side Trust & Savings Bank, 280 Ill. App. 308. Moreover, the defendants herein were not parties to the receivership proceedings, and therefore are not in position to question collaterally the receiver’s conduct of his trust in an independent suit brought against them. (People v. Dime Savings Bank, 350 Ill. 503.)

Defendants contend in their brief, but did not press the point on oral argument, that plaintiffs’ claim is excessive, in that they should not be entitled to recover from the guarantors for taxes accrued on the mortgaged real estate. They cite and rely on Borker v. Bendix, 288 Ill. App. 260, where the plaintiff, as owner of a $500 bond, sued on the 100 per cent guaranty by Bendix, and recovered $500 plus $60 accrued interest at 6 per cent to January 1, 1935, plus 7 per cent interest on the $560 for approximately 13 months. No allowance was made on the claim for attorneys’ fees. Defendants’ counsel propound the inquiry, “Could Borker also have recovered any part of the unpaid taxes?” and they answer the inquiry by saying that he obviously could not, because the limit of his claim was the amount required to make him whole, namely, principal and interest on his bond. We think Borker v. Bendix is readily distinguishable from the case at bar, on the ground that Borker was there suing as a bondholder on his bond, whereas, in this proceeding, the trustee is suing on the trust deed, as extended, and defendants guaranteed both. The bond did not give Borker the right to sue for taxes accrued on mortgaged property, but the trust deed did itself give the trustee this right.

Holding as we do that plaintiffs are entitled to maintain this suit, that defendants have never been released from the obligations they assumed in their contract of guaranty, which was undoubtedly one of the principal inducements for the purchase of bonds by the investing public, and that the amount sought to be recovered is not excessive, the judgment of the superior court is reversed and the cause remanded with directions to enter judgment in favor of plaintiffs and against defendants for the amounts sued for, plus attorneys ’ fees, as provided in the instrument of guaranty, proof of which was expressly postponed until final determination of the case.

Judgment reversed and cause remanded with directions.

John J. Sullivan and Burke, JJ., concur.


source: Caselaw Access Project

license: Public Domain

text:
    John M. Weiland et al., Appellants, v. Anna M. Weiland, Appellee.
    Gen. No. 39,984.

      Heard in the second division of this court for the first district at the February term, 1938.
    Opinion filed November 17, 1938.
    Rehearing denied December 7, 1938.
    Pritzker & Pritzker, of Chicago, for appellants; Richard Weinberger, of Chicago, of counsel.
    William R. Wiley, of Chicago, for appellee.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

John M. Weiland, Theodore Weiland and Lillian Sanford, as trustees, brought suit at law against Anna M. Weiland on a promissory note for $3,000. Trial was had by the court without a jury, resulting in findings and judgment in favor of defendant, from which plaintiffs appeal.

From evidence adduced upon the hearing, it appears that Anna M. Weiland, the defendant, was executrix of the estate of Margareth Weiland, her mother. Among the assets of the estate was an indebtedness due from Mary Olinger, defendant’s sister, who was also one of the beneficiaries. There is evidence that Mrs. Olinger’s indebtedness to her parents was secured by a mortgage on her home. Defendant testified that her parents would have disapproved of the foreclosure on the Olinger home to enforce payment of this indebtedness, and she believed that Mrs. Olinger’s distributive share of the assets of the estate would be more than sufficient to pay the indebtedness. Accordingly, defendant gave to her brothers and sisters, who were all beneficiaries of the estate, notes in various amounts evidencing the respective sums that would have been collected from Mrs. Olinger had she paid her indebtedness. It was sought through this procedure to avoid suit or foreclosure of the mortgage. Defendant computed the amount of the notes by dividing the Olinger indebtedness by the number of persons entitled to distribution from the estate, and where any distributee was indebted to the estate, as several of them were, the amount of such debt was deducted from the note. The note sued on is one of the notes thus made and given to defendant’s brother, John Weiland, who died in August, 1932. His estate was never probated, all of his debts having been paid by his son, one of the plaintiffs herein, and the assets distributed to the heirs and next of kin. Subsequently these heirs, by written instrument, assigned the note to plaintiffs, who instituted this suit.

Three principal defenses were interposed by defendant. It is first urged that the heirs of a person dying intestate cannot maintain a suit in their own name upon a promissory note payable to him. This defense was presented to the court through an amendment filed after the hearing, contesting plaintiffs’ right to bring this suit. The proofs were thereupon reopened, and plaintiffs offered testimony to show that the payee of the note had died in August, 1932, that all his debts were paid by his son within a year and a half after he died, that the payee’s estate was never probated, and that all the assets were distributed among the heirs. The question thus presented is whether, under these circumstances, plaintiffs were entitled to maintain this suit. Defendant’s counsel argues that the only one who may conduct a suit to collect the assets of an estate and distribute them, is the personal representative, and not the assignee of the heirs, and he cites and relies upon Leamon v. McCubbin, 82 Ill. 263, and Oulvey v. Converse, 326 Ill. 226, to sustain defendant’s position. While it may be conceded that these decisions state the general rule, the circumstances of this case afford an exception to the rule approved by the authorities. In neither of the foregoing cases was it shown that the payee had died intestate, that the assets were not probated and that all debts had been paid. The law applicable to the question involved is well stated in Moore v. Brandenburg, 248 Ill. 232, wherein Mr. Justice Farmer, speaking for the court, said that one of the questions involved was whether the heirs of an intestate, where there is no administration and no debts, take such title to the personal property as will enable them to maintain a bill to procure their distributive share of the estate. The contention was there made that no title to personal property of an intestate vests in the heirs without administration, and that they cannot, therefore, maintain a bill in equity to procure their distributive share of the estate. In discussing this question, the court said (p. 236): “While the naked legal title to the personal property of an intestate vests in the administrator, the equitable interest vests in the heirs and the administrator holds the property in trust for the payment of debts. The residue after the payment of debts belongs to the distributees. (People v. Brooks, 123 Ill. 246.) The general rule is that the administrator represents the deceased as to the personal estate and is entitled to take possession of it, and when the liabilities are discharged distribute the residue to the heirs according to the laws of descent, and where there is an administrator the heirs are not entitled to sue for and recover property belonging to or demands due the intestate. There is, however, an exception to the general rule where there are no debts or claims of any kind against the estate, and nothing for an administrator to do, if one should be appointed, except to distribute the personal estate to those entitled to it by law. In such cases, although the authorities are not in entire harmony, the weight of them is that it is unnecessary to go through the legal form of having an administrator appointed for the sole purpose of distributing the personal estate, but the heirs may maintain necessary actions for the purpose of reducing property to possession in order that it may be distributed. In McCleary v. Menke, 109 Ill. 294, and Lynch v. Rotan, 39 id. 14, it was held that where there are no debts of the intestate and no administration upon the estate, the heirs are entitled to the property and may maintain an action therefor in their own names.” (Italics ours.) On oral argument counsel for defendant sought to distinguish Moore v. Brandenburg from the case at bar upon the theory that it was a chancery proceeding. However, we see no difference in principle, and take Moore v. Brandenburg as expressing the exception to the general rule for which plaintiffs contend.

It is next urged by defendant that there was no valid consideration for the note. Counsel argues that the instrument sued on was not a negotiable instrument, but a chose in action, and that since it was not a negotiable instrument its offer in evidence did not make out a prima facie case, and when rebuttal evidence was offered, it became incumbent upon plaintiffs to prove their case by a preponderance of the evidence. Blanke v. Hammel, 256 Ill. App. 251, is cited to support this contention. The declaration in that case was held insufficient because the assignee of the chose in action did not state the actual ownership thereof by the plaintiff, nor set forth facts showing how and when he acquired title thereto. In the case at bar, however, count one of plaintiffs’ amended complaint set forth specifically all the facts and circumstances relating to the death of Margareth Weiland, the appointment of Anna Weiland as trustee and executrix under the will, the delivery of the note to John Weiland and a detailed description thereof, the death of John Weiland, and the transfer of the note to plaintiffs by an instrument in writing, as well as the fact that plaintiffs became the bona, fide owners and holders of the note, and the failure of defendant to make payment thereon. These allegations and proof thereof were sufficient to comply with the requirements of section 18 of the Practice Act, Cahill’s Ill. St. 1931, ch. 110, par. 18, which provides in substance that plaintiff shall state the manner in which he became entitled to bring the action. Upon trial plaintiffs offered the note in evidence. It was then incumbent upon defendant to prove, if she could, a want of consideration. (American Nat. Bank v. Woolard, 342 Ill. 148.) To maintain this burden defendant testified that she received no benefit from the making of the note. On cross-examination plaintiffs’ counsel elicited from defendant an admission that if Mrs. Olinger had paid the indebtedness to the estate the money would have been distributed in lieu of the notes, and defendant also explained that at the time of the death of the Weiland parents, certain loans they had made to some of their children were outstanding and unpaid, including the indebtedness of Mrs. Olinger. The mere fact that defendant received no benefit from the execution of these notes, as she claims, would not of itself constitute a want of consideration. (Barzantny v. Cullen, 287 Ill. App. 440, 443; American Nat. Bank v. Woolard, 342 Ill. 148, 157.) It clearly appears that Mrs. Olinger received something of value through the arrangement made with the other distributees of the estate; her home was not foreclosed, and no effort was made to collect the indebtedness. Whether the debt was completely canceled or only extended until such time as the real estate in the mother’s estate might be liquidated, does not appear of record, but it is certain there was a forbearance extended to Mrs. Olinger, and a benefit of this kind is in itself a sufficient consideration to support a note. (Harris v. Harris, 80 Ill. App. 310, affirmed in 180 Ill. 157; 8 Corpus Juris 213, Bills and Notes, sec. 348.) Moreover, the payee who accepted the note under the arrangement made by defendant forbore his right to receive cash which would have been paid to him had Mrs. Olinger paid her debt, or a share in the title of the property in the event of foreclosure, and this, under the authorities, constitutes a good consideration for the instrument sued on.

The remaining defense interposed by defendant was that the statute of limitations bars recovery. This defense is untenable, for two reasons. The original complaint was filed one day before the 10-year period had elapsed, and the amended complaint, which was later filed, set up the same cause of action as is contained in the original pleading. Under ch. 110, par. 170, sec. 46, Ill. Rev. Stat. 1937 [Jones Ill. Stats. Ann. 104.046], the amended complaint relates back to the date of filing of the original complaint. (Smith v. Illinois Power Co., 279 Ill. App. 505.) Moreover, defendant volunteered the information on cross-examination that she had paid interest on the notes given to the various distributees for a period of one year, and these payments tolled the statute of limitations during that period (Harts v. Emery, 184 Ill. 560; Berry v. Berry, 238 Ill. App. 507.) The amended complaint was filed within 10 years from the last interest payment.

Counsel argues that defendant’s testimony as to interest payments is of no avail to plaintiffs, because both the original and amended complaints alleged that nothing was paid on principal or interest, and that no law is better settled than that proofs without allegations are just as unavailing as allegations without proofs. However, the statute of limitations was interposed as one of the defenses, and being an affirmative defense, it was incumbent upon defendant to maintain the same by competent evidence. Since her own testimony disproves the contention that the statute had run, she cannot very well complain thereof.

The only other contention made by defendant is that she is not liable on the note because she executed it as an agent and not in her personal or individual capacity. Plaintiffs brought this suit against defendant both individually and as executrix. Holding as we do that the note was supported by a valid consideration, defendant must be liable in one capacity or the other. Williston & Thompson, in Yol. 1 of their 1936 Revised Edition on Contracts, sec. 310, p. 906, states the rule as follows: “Any contract made after the testator’s death by an executor or administrator is necessarily his personal contract, as the common law does not recognize the estate of a deceased person as an entity. . . . ” The mere fact that defendant described herself as executrix of an estate does not alter this rule, and the additional words accompanying her signature must be considered as descriptio personam. (Portis v. Sangerman, 159 Ill. App. 508; Jahp v. Bradley, 185 Ill. App. 215; Marsh v. Steiniger, 225 Ill. App. 114.)

Inasmuch as the cause was heard by the court without a jury it would serve no useful purpose to remand it. The judgment of the circuit court is therefore reversed and judgment entered here in favor of plaintiffs for the amount of the note together with interest thereon at five per cent from April 1, 1928 to November 12, 1937 ($1,441.90) and interest on $4,441.90 from November 12, 1937.

Judgment reversed and judgment here for plaintiffs.

John J. Sullivan and Burke, JJ., concur.


author: Mr. Justice Burke

text:
    James D. Connell, Appellee, v. North Town Motor Company, Appellant.
    Gen. No. 39,980.

      Heard in the second division of this court for the first district at the February term, 1938.
    Opinion filed November 17, 1938.
    Freeman & Freeman, of Chicago, for appellant.
    Leonard J. Mandel, of Chicago, for appellee; Henry M. Seligman, of Chicago, of counsel.
   Mr. Justice Burke

delivered the opinion of the court.

This appeal arises out of a judgment for $200 rendered in the municipal court of Chicago on October 13, 1937, on a trial by the court without a jury.

Appellee (plaintiff) filed a motion, supported by an affidavit and suggestions, that the appeal be dismissed, and we reserved decision. Notice of appeal was filed in the court below on November 2, 1937, and under the practice prevailing at that time the last day for filing the record in this court was Saturday, January 1, 1938, which was a holiday known as New Year’s day. The record was not filed until Monday, January 3,1938, being the sixty-second day after notice of appeal was filed. No extension of time was requested or granted. On December 31,1937, the following order was entered here:

“On the Court’s own motion, it is ordered that this Court stand adjourned until Monday, January 3rd, A. D., 1938, at ten o’clock, A. M., and that the Clerk’s office remain closed until Monday, January 3rd, A. D., 1938, in observance of New Year’s Day.” Plaintiff cites subparagraph (a) of paragraph (2) of Buie 36 of the Supreme Court, reading:

“Whether the praecipes do or do not specify any proceedings at the trial, the record on appeal shall be transmitted to the reviewing court not more than sixty days after notice of appeal has been filed. ...” The following portion of paragraph (2) of the rule is also pertinent: “(b) . . . Where the report of the proceedings at the trial or an agreed statement of facts is filed in the trial court within proper time but the record is not transmitted to the reviewing court before the expiration of the time fixed in this rule, the trial court or the reviewing court on application of the appellee and upon proper showing, may dismiss the appeal; but where the record shall have been filed in the reviewing court after the expiration of the time fixed by this rule but before such application is made by the appellee, the reviewing court shall dismiss the appeal. ’ ’

In considering this matter we should bear in mind paragraph (2), sec. 200, ch. 110, Ill. Rev. Stat. 1937, (sec. 76, Civ. Prac. Act) [Jones Ill. Stats. Ann. 104.076], that

“An appeal shall be deemed perfected when the notice of appeal shall be filed in the lower court. After being duly perfected no appeal shall be dismissed without notice, and no step other than that by which the appeal is perfected shall be deemed jurisdictional.” Section 6, ch. 100, Ill. Rev. Stat. 1937 (sec. 6, Notices Act) [Jones Ill. Stats. Ann. 107.292], provides:

“In computing the time for which any notice is to be given, whether required by law, order of court or contract, the first day shall be excluded and the last included, unless the last is Sunday, and then it also shall be excluded.” Appellee maintains, under the authority of Richter v. Chicago & Erie R. Co., 273 Ill. 625, that where the last day for filing a record is a holiday such day will not be excluded from the computation of time unless it falls on a Sunday, and we accept that as a correct statement of the law. In the instant appeal the last day fell on a Saturday and the statute last quoted did not apply. Section 18, ch. 98, Ill. Rev. Stat. 1937 (sec. 17, Negotiable Instruments Act) [Jones Ill. Stats. Ann. 89.018], designates the days that are declared to be legal holidays and half holidays, and states that

“. . . For all purposes whatsoever, as regards the presenting for payment or acceptance, the maturity and protesting and giving notice of the dishonor of bills of exchange, bank checks and promissory notes and other negotiable or commercial paper or instruments, be treated and is considered as is the first day of the week, commonly called Sunday. When any such holidays fall on Sunday, the Monday next following shall be held and considered such’ holiday. All notes, bills, drafts, checks, or other evidence of indebtedness, falling due or maturing on either of said days, shall be deemed as due or maturing upon the day following, and when two (2) or more of these days come together, or immediately succeeding each other, then such instruments, paper or indebtedness shall be deemed as due or having matured on the day following the last of such days.” A separate statute, approved June 24, 1921, adds November 11, Armistice day, to the list of holidays. Section 216 of the same chapter (sec. 193, Negotiable Instruments Act) [Jones Ill. Stats. Ann. 89.216] reads:

“Where the day, or the last day, for doing an act herein required or permitted to be done falls on Sunday or on a holiday, the act may be done on the next succeeding secular or business day.” The language quoted from the Negotiable Instruments Act has no application to the filing of records or pleadings in court. Appellant (defendant), in its counter suggestions, argues that the motion to dismiss comes too late, having been made after appellee’s brief and argument was filed. Appellant’s brief and argument and abstract were filed on February 14, 1938. March 11, 1938, appellee filed a supplemental abstract, and on March 24, 1938, appellee filed his brief and argument. The motion to dismiss which we are discussing was filed on April 15, 1938, about three weeks after he had filed his brief. We held in Finlen v. Foster, 211 Ill. App. 609, 621: “In actual practice the filing of appellees ’ brief is held to be equivalent to a joinder in error. Truesdale v. Ford, 40 Ill. 80; DeBeukelaer v. People, 25 Ill. App. 460; Ferrias v. People, 71 Ill. App. 559; Fread v. Hoag, 132 Ill. App. 233; McCormick v. Higgins, 190 Ill. App. 241; Tobias v. Tobias, 193 Ill. App. 95.

“By joining in error appellees waived the right to move to dismiss the appeal. Matson v. Connelly, 24 Ill. 143; Brockway v. Rowley, 66 Ill. 99; Dinet v. People, 73 Ill. 183; Kane v. People, 13 Ill. App. 382; Fread v. Hoag, supra; Kircher v. M. Keating & Sons Co., 145 Ill. App. 1; People v. Rudorf, 149 Ill. App. 215.”

On March 1, 1938, on the call of the February term calendar, the appeal was ‘ ‘ Taken on abstract and briefs filed by appellant and briefs of appellee due March 14/38.” Having in mind the fact that on March 1, 1938 (prior to the time the motion to dismiss was presented), the appeal had been taken, it is interesting to observe that our Supreme Court, in Farrell v. West Chicago Park Commissioners, 182 Ill. 250, 252, said: “When the motion [to dismiss the appeal] was made the appellants had submitted their controversy to the court, and it could not be entertained without setting aside the order by which the case was taken. There was no motion to set aside that order, and the motion to dismiss must be denied.” Had appellee desired to move to dismiss the appeal on the ground that the record was filed two days late, he should have done so before he filed his brief and argument and before the case was taken by the court. Appellee’s brief and argument calls our attention to parts of the record and abstract, and we must assume that at the time he filed the brief he knew that the record had been filed two days beyond the time permitted. Under such circumstances it must be assumed that he elected to ignore the delay in filing the record. For the reasons stated the motion to dismiss the appeal is denied.

Having disposed of the motion to dismiss, we shall now consider the points presented in the respective briefs:

Plaintiff, a real estate broker, claimed a commission for procuring for defendant a leasehold on a one-story garage building located at the southeast corner of Devon and Leavitt streets, in the city of Chicago, and asserted that the commission he earned amounted to $369. Harry Kantoff was called as a witness for plaintiff under section 33 of the Municipal Court Act, and testified that in 1935 he was president of defendant corporation; that he had business dealings with plaintiff in connection with the lease for the southeast corner of Devon and Leavitt streets; that on November 7, 1935, witness brought to plaintiff a letter, reading as follows:

“November 7, 1935
“James D. Connell & Co.
“736 Sheridan Road
“Chicago, 111.
Gentlemen:
“In accordance with our telephone conversation, we submit the following offer for building at Devon and Leavitt Streets:
“We shall accept this building on or about Decern-. ber 1st at a rental for the first year at $325.00 and for each of the following two years at $350.00.
“Very truly yours
“North Town Motors Company (Signed) Harry Kantoff ’ ’;
“HK;L

that he had a conversation with plaintiff at the time; that plaintiff told Mm that the property was in foreclosure and that negotiations would have to be made through the bondholders’ committee; that Mr. Slavin, then the secretary of defendant corporation, was present at several conversations concerning the lease; that the first conversation took place sometime in the middle of the summer of 1935; that the first conversation at which plaintiff, Slavin and witness were present, took place sometime in September, 1935; that plaintiff was authorized by witness to negotiate with the bondholders’ committee; that on December 11, 1935, plaintiff told witness that “he could secure the lease if we would bring in a deposit”; that witness told plaintiff that he was no longer interested. Plaintiff testified that he was a licensed real estate broker; that the letter was brought to his office by Mr. Kantoff; that on November 7 Messrs. Kantoff and Slavin asked him to procure them a building; that he explained to them that he could get the building at Leavitt and Devon; that they were much interested; that he told them he could get it at a rental of $325 for the first year and $350 for the next two years and that he would have to go to court on a petition to get authority of the court to make a lease on account of the building being in receivership; that on November 8 Slavin and Kan-toff told him that “they would take the lease if it commenced on or about the 1st of December, to get it just as soon as we could possibly get it, as they wanted the building”; that on December 11 witness was in court; that on December 12 he reported to Kantoff and Slavin that the case was continued; that he told them “they wanted a deposit, that the Judge wanted a certified check. He continued the case from whatever that date was, the 11th or the 12th, to the 16th, and wanted a certified check from the North Town Motors ’ ’; that witness told them that the lease would be ready for them as soon as they gave the deposit, and to be in court on the 16th; that Kantoff and Slavin told him at that time that they were not interested; that the customary and reasonable charge for such services would be $369. On cross-examination the witness testified that he did not submit a lease; that as far as he knows the court never authorized a lease; that someone else got the building. Mr. Kan-toff, recalled by defendant, testified that at the time he delivered the letter to plaintiff he said, “Here’s a letter. We will accept the property not later than December 1, 1935, because we must renew our lease at the old premises”; that at that time nothing was said about wanting a deposit; that plaintiff did not at any time submit a lease for the premises; that witness did not tell plaintiff that he would pay the first month’s and the last month’s rent. Plaintiff, being recalled, testified as follows: “Q. Was there anything said about a deposit of money at that time? A. No, none whatsoever. Q. When did that question come up for the deposit of the rentals? A. When I asked him for the deposit? Q. Yes. A. After the first hearing come up in court, December 11th. Q. Did you talk to them before? A. I talked to them but never asked them about money. Q. What did you say to Mr. Kantoff about the deposit of rentals that will be necessary to be made? A. On the 11th of December? Prior to that time, when we first entered into negotiations, I told Mr. Kantoff that when you enter into a long lease, a two or three or five year lease, it is usually customary to put up, if you don’t possess credit rating, two or three months in advance to guarantee the rent to the owners. He told me that was perfectly all right, but he possessed credit rating, and he started to tell me all about his business. On December 9th, I talked with Mr. Kantoff relative to information we needed for the petition, and was told to go ahead. Q. Did he say to you then that he needs the premises on December 1st ? A. He just told me to go right ahead. ’ ’ On cross-examination witness testified: “Q. When was the first time you told them you needed two months ’ rent on this particular building? A. On this particular building? Either the 11th or the 12th. I think it was the 11th. Q. The 11th or 12th of December? A. Yes. Q. Before that you didn’t say anything about a deposit on this particular building? A. Yes. Not on this particular building, but I did tell him they would have to make a deposit if he couldn’t qualify.”

The question arises as to whether plaintiff procured a lessor who was ready, willing and able to lease on the terms and conditions stated. No lease was ever entered into. A bondholders’ committee sought permission from the superior court to have the receiver enter into a three-year lease providing that defendant pay $325 a month during the first year and $350 a month for the two succeeding years. It is evident that the court declined to enter the order prayed for and suggested that defendant make a deposit of the first month’s rent and the last month’s rent. From a careful reading of the testimony of plaintiff it will be observed that he states that the first time that the requirement for two months’ deposit of rent was mentioned was either on the 11th or the 12th of December. He had mentioned generally that in securing leases on buildings a deposit is required to be made. The letter of November 7 undoubtedly states the terms of the agreement and no mention is made therein of a deposit of two months’ rent. It is significant that while the petition filed in the superior court sets out the offer to lease the premises, it does not mention a deposit. The proposal presented to defendant corporation after the matter was in court was a different proposal from the one defendant had theretofore accepted in that there was a requirement of a deposit of two months’ rent. It is undisputed that the proposal to enter into a lease on the altered conditions was rejected by defendant. Hence, plaintiff did not procure a lessor who was ready, able and willing to enter into a lease on the terms and conditions stated. The proposed lessor, on a modification suggested by the chancellor, was willing to enter into a lease on terms and conditions different from those stated. The point is also made that under the original proposition defendant corporation was to be given possession on or about December 1, and that the lease finally proposed would not give possession until long after that time. We shall not extend this opinion by a discussion of that phase of the case, as what has been said is controlling.

Taking as true the evidence in favor of plaintiff’s claim in its most favorable aspect to plaintiff, we find that it is clearly insufficient to support the judgment. No good purpose can be served by remanding the cause for a new trial. Therefore the judgment of the municipal court of Chicago is reversed and judgment is entered here against plaintiff for costs.

Judgment reversed and judgment here against plaintiff for costs.

Friend, P. J., and John J. Sullivan, J., concur.


text:
    People of the State of Illinois, Defendant in Error, v. Robert Knaze, Plaintiff in Error.
    Gen. No. 40,016.

      Opinion filed November 17, 1938.
    Sinon A. Murray, of Chicago, for plaintiff in error; Louis A. Rosenthal, of Chicago, of counsel.
    Thomas J. Courtney, State’s Attorney, for defendant in error; Edward E. Wilson, John T. Gallagher, Melvin S. Rembe and Blair L. Varnes, Assistant, State’s Attorneys, of counsel.
   Mr. Justice Burke

delivered the opinion of the court.

An information was filed in the municipal court on November 3, 1937, charging that on October 30, 1937, defendant was unlawfully and knowingly an inmate of a certain house of prostitution and assignation and place for the practice of fornication, prostitution and lewdness, situated at 2606 Calumet avenue, Chicago. It appears that four cases, against Robert Knaze, Benner Knaze, Curtis Littles and Arthur Lindsay, were separately on for trial and that the parties stipulated that the four cases be tried and heard together.

Defendant pleaded not guilty, a trial by jury was waived, and the court found defendant guilty and sentenced him to serve a term of six months in the House of Correction. Defendant did not offer any evidence in his behalf. We have considered the contention that the information is insufficient. We are satisfied, however, that it does sufficiently inform defendant of the nature and cause of the accusation. The statute sufficiently describes the offense. Defendant urges that hearsay evidence was improperly admitted by the court. James P. Hackett, a police officer, testified that he went to the premises at 2606 Calumet avenue at 12:30 a. m. and was admitted by one Benner Knaze; that “one of the defendants, not here, was sitting in the front room. We had a conversation for a few minutes. She asked us if we didn’t want to have a drink before we went upstairs and I said, ‘Tes.’ • I said I’d take Scotch and soda and she said she has some bourbon and she put it into a cocktail. I paid her a dollar for the two drinks. We drank the drink and talked and she asked us if we were ready to go upstairs and I said, ‘Yes.’ This girl was supposed to be a Japanese girl. We started upstairs and she said, ‘You can pay me now.’ I paid her $10.00 and $1.00 for the drinks. I went upstairs with the defendant who isn’t here and she started to undress and I placed her under arrest. This other defendant was under arrest and my partner was downstairs, and the three men defendants — this defendant (indicating, for the purposes of the record, Curtiss Littles) was in bed with the girl who admitted she worked there. He said he is married to her. This defendant (indicating, for the purpose of the record, Arthur Lindsay) was in bed alone, and this defendant (indicating, for the purpose of the record, Robert Knaze) was in bed and he is supposed to be the husband of the girl who was with me.” Over objection he testified to a conversation with Elizabeth Knaze, outside the presence of the accused, in the women’s lockup after the arrest.

Another officer, Dennis Parkerson, testified that he came to the premises at about 1:25 a. m., that Benner Knaze came to the door and greeted him, that he pretended he was intoxicated and she put her arms around him to see if he had a gun, and then testified to a conversation, outside of the presence of the accused, with Elizabeth Knaze. The People relied on the testimony of the two officers to convict defendant. It is apparent that without the admission of the conversations outside of the presence of defendant the record would be devoid of any proof that he was an inmate of a house of prostitution. The Supreme Court, in People v. Newbold, 260 Ill. 196, says (p. 199):

“A detective, who was a witness for the prosecution, testified to meeting two girls on the street who afterward went into the house and asked him to buy them a drink. He did so, and one of them asked him to go up-stairs. He asked her charge, and she told him three dollars. He asked the girls if people could go up-stairs without baggage, and they told him they could and said they had been there lots of times. This conversation and invitation should not have been admitted. The detective went into the house with two girls picked up on the street and had a private conversation with them which neither the plaintiff in error nor any other person had an opportunity to hear. While the conduct of the detective and the girls was improper it was secret, and constituted no evidence against the plaintiff in error that he permitted acts of the character referred to.” In People v. Berger, 284 Ill. 47, the court sustained a conviction where the defendant was charged with “keeping or maintaining a house of ill fame or place for the practice of prostitution or lewdness, or letting a house, rooms or other premises for such purpose,” and held that it was proper to admit testimony of a police officer as to what was said by one of a couple in the presence of the defendant. In commenting on a Georgia case, the Supreme Court, in People v. Berger, supra, says (pp. 51, 52): “The proprietor of a hotel or public rooming house is presumed to have a general knowledge that will guide him, in a large degree, on matters of this kind. It has been held that the proprietor of an establishment of a quasi public character is presumed by law to know what takes place in his own establishment, to the extent, at least, of throwing upon him the burden of showing, if the law is violated in the conduct of the place, that it is not his fault. (Sanders v. State, 74 Ga. 82.) In this last case the court in so holding held that such a rule was in accordance with justice and common sense. In some jurisdictions the conversations of those in the house, even out of the presence of the accused, are competent to show the character of the house. (State v. Toombs, 79 Iowa, 741; Herzinger v. State, 70 Md. 278.) Under the holding of this court in People v. Newbold, 260 Ill. 196, such conversations out of the presence of the accused would not be admissible. We think, however, that under the circumstances of this case these conversations, having, as we have held, taken place in the presence of plaintiff in error, were admissible on the trial. . . . An admission or confession may be implied from the conduct of the party when charged with a crime or with complicity therein, or when statements are made in his presence affecting him, when the circumstances afford him an opportunity to act or speak in reply and men similarly situated would naturally deny the implied guilt or make explanations or statements.” The opinion in the Berger case points out that on a prosecution for keeping such a house the State may prove the character of the inmates and frequenters of the house, and the bad reputation of those who visit such a house. In the case at bar the People did not attempt to prove the reputation of the house or of the persons who visit it. The testimony to which defendant objected, of conversations out of the' presence of defendant, should have been excluded. It was clearly hearsay. Such conversations did not take place in the presence of the accused. At the time of the arrest of defendant he was in bed, and it is not contended that he heard the conversation. The testimony as to a conversation in the women’s lockup was clearly hearsay as to defendant. It was a narrative statement of past events and was admissible only against the person making the same. Without the conversations to which the police officers testified defendant could not be convicted.

The judgment is reversed and the cause is remanded.

Judgment reversed and cause remanded.

Friend, P. J., and John J. Sullivan, J., concur.