author: Mr. Justice Dove

text:
    George Dierschow, Appellant, v. West Suburban Dairies, Inc., Appellee.
    Gen. No. 8,585.
    Opinion filed August 8, 1934.
    Langille & Language, for appellant.
    Walter E. Boerger, for appellee.
   Mr. Justice Dove

delivered the opinion of the court.

This is an appeal from a judgment' of the county court of DuPage county in a suit brought by appellant to recover wages and attorney’s fees. The case originated in the justice court, where judgment was rendered in favor of appellant for $106.24, the full amount of his claim. On appeal to the county court, judgment was rendered in favor of appellant for $78.28, which was the amount appellee admitted to be due appellant as wages and the claim for attorney’s fees was denied. The case as tried was consolidated with two other cases involving the same question, brought by Orrin Karp and Frederick Gfaede against appellee.

The facts in the case are that appellant, on March 17, 1929, was employed as a milk wagon driver' by Marx Brothers, a partnership, engaged in the dairy business under the name of Marx Brothers Dairy., In the summer of 1930, Marx Brothers entered into a written contract hereinafter referred to as a Craft contract with the Milk Wagon Drivers Local Union No. 753. Subsequently and on March 5, 1931, Marx Brothers incorporated their business under the name of West Suburban Dairies, appellee herein, and the corporation succeeded to the business of the partnership, acquired all its assets and assumed all its liabilities. Appellant continued in the employ of the concern after its incorporation and until April 22, 1931.

The pertinent part of the Craft contract entered into between the employer and the union provided that the wage scale of a retail route man, such as appellant, would be $50 per week for a six-day week; that the Craft contract would be in effect until May 1,1932, and that during the life of the contract the employer agreed that no employee would be asked to make any written or verbal contract, the terms of which would conflict with the provisions of the Craft contract. This contract further provided that should charges of drunkenness, dishonesty, incompetency, smoking or drinking while on duty be preferred against any member of the union, and such charges proven, the union agreed that such member would be fined or suspended and the employer agreed that if any member should be suspended or expelled from the union for good cause, he, the employer, would discharge such person within 30 days after receiving due notice from the officials of the union. By the contract the union agreed, at all times, as far as in its power, to further the interests of the employer and it was mutually agreed that should any controversy arise, not provided for in the agreement, it should be submitted to a committee of five for arbitration, two to be selected by each party and the fifth by the other four, and it was specifically stated that during such time as the matter was pending, there should be no lockout or strike and the decision of the committee should be final.

On October 1, 1930, when the Craft contract became effective, appellant joined the union, paying $100 initiation fee arid $18 quarterly dues every three months thereafter and his weekly wages were increased to $50 in order to comply with the terms of the Craft contract. At that time appellant was receiving less than $50 per week and Marx told appellant the amount his wages would be after the Craft contract was executed and appellant stated he would be willing to accept that amount. From October 1, 1930, until April 8, 1931, there was no discussion as to wages and no change therein or in appellant’s working conditions. On April 8, 1931, Marx called the drivers, Graede, Karp, Voirol and appellant into a room adjoining his office. There is a conflict in the evidence as to what was there said. According to the testimony of Marx, he, Marx, stated to the drivers that appellee was steadily losing money and couldn’t continue to pay the wages that were being paid; that while he hated to take the step, it was absolutely necessary and a sliding scale had been worked out which he thought would be fair to all. He then stated that commencing at once the rate of appellant’s wages would be $6 per day for six days or $36 per week. To this appellant said: “You are hitting me pretty hard. ’ ’ Marx then told them to talk it over among themselves and decide what they wished to do. Marx then left the room, returned in about one-half an hour, and according to Marx, Yoirol there in the presence of appellant and the other drivers said: “The boys have agreed to go along under the new arrangement for the time being.” According to Yoirol, Gaede, Karp and appellant, Yoirol said to Marx: “Let it ride as it is for the time being,” and according to the testimony of several of the witnesses, after appellant had said the reduction was hitting him pretty hard, Marx said: “To take it or leave it.” YTthout objection appellant testified that he did not agree to work under the reduced wage scale of $36 per week, but because he was a member of the union he found out he could not leave the employment of appellee and so continued to work for appellee thereafter and until April 22, 1931, when appellant received a check for wages at the rate of $36 per week. Appellant retained this check and thereafter instituted this suit.

In the lower court it was stipulated by the parties hereto that appellant received his wages in semimonthly payments, and has received all moneys due him to and including April 8, 1931; that the issue now to be tried is whether, when appellant went to work on the morning of April 9, 1931, he was employed under a separate'and different contract from that which applied to his employment on the day before and during the period between October 1,1930, and April 8,1931; that appellant claims his rate of wage was $50 a week from April 9, 1931, to April 22, 1931, while appellee claims that according to negotiations in April, appellant’s wages became $36 per week from April 9, 1931, to April 22, 1931, inclusive; that the simple question presented for decision is whether the contract in force to and including April 8, 1931, continued in force until April 22, 1931. If the court finds it did and thereby sustains the contention of appellant, the amount due appellant is $106.24. If the court sustains the contention of appellee, the amount due the plaintiff is $78.28. A similar stipulation was made as to Karp and Gfaede.

Appellee insisted in the trial court and contends in this court that the Craft contract between it and the Milk Wagon Drivers Local Union No. 753 is not a contract between it and the individual members of the union and that although a party thereto, it had a right to make an independent contract with appellant with reference to the amount of wages appellant was to receive and had a perfect right to disregard the existing .agreement which it and appellant’s union had previously executed. The county court held that a new contract of employment between appellant and appellee was made on April 8, 1931; that the Craft contract lacked mutuality and appellee was not bound by its provisions and therefore rendered judgment in favor of appellant for the stipulated sum of $78.28.

Appellant does not insist that the Craft contract constituted a contract of employment between him and appellee, inasmuch as it did not obligate appellant or anyone else to work, nor did it obligate appellee to pay appellant or any particular person money. Appellant does contend, however, that the Craft contract obligated appellee, if it employed appellant and he was a member of the union, to abide by the terms and conditions of the employment which were fixed, regulated and determined by the provisions of the Craft contract; that the Craft contract was made by his union for his benefit and he, having accepted the provisions of the contract, may enforce the benefits accruing to him.

In Gulla v. Barton, 149 N. Y. S. 952, it appeared that the defendant operated a brewery and entered into an agreement with Malsters ’ Union, No. 48, of Syracuse, N. Y., by the terms of which defendant agreed to employ only union men, and in the event extra help was needed, members of the International Union of United Brewery Workmen, of which Malsters ’ Union was a local subordinate branch, should be employed, at union wages, and all employees were to receive $18 per week. This agreement provided that it was to continue in force one year from October 1, 1912, and was renewed for another year. In the years 1911 and 1912 plaintiff worked for the defendant for 29 weeks and in 1912 and 1913 he worked for the defendant 20 weeks and received therefor $9 per week, the weekly wage agreed upon between him and the defendant, and this suit was instituted to recover $9 more for each week’s service, the plaintiff basing his action upon the contract of defendant and the Malsters’ Union. In its opinion, the court said: “The defendant’s object in making the agreement with the union was to prevent strikes and to secure the use of the union label. The union furnished labels, and the defendant used them, and did business all the time referred to as a union brewery. The union was formed for the benefit and protection of its members, and especially for the purpose of securing to them a reduction in the hours of toil and an increase in wages. The union is based upon the idea that the individual workmen cannot fully protect themselves against their employers, but that by united action they can be better protected in the respects mentioned. It is supported by dues and fees paid by its members, which dues the member pays for the benefit which he expects to realize from the organized action of himself and his coworkers. The agreement referred to was a valid contract, which may be enforced in any proper manner. The renewal of the agreement indicates that it was beneficial to the defendant’s firm. The union entered into the contract for the benefit of the plaintiff and the other employees in the defendant’s brewery, and for the benefit of all union workmen. It is urged, however, that the plaintiff cannot maintain an action upon the agreement, and that he has waived the benefits of it by contracting for himself. Apparently he did not know of the agreement between the defendant and the union until May, 1913, when a dispute arose between the plaintiff, the defendant, and the other employees. An officer of the union was called to the brewery, and then showed plaintiff the agreement, and insisted that hereafter union wages must be paid according to the agreement, and for the remainder of the season such wages were paid; the plaintiff stating to the defendant at the time that he would look for his back pay through law. The evidence does not show any act of the plaintiff, made with knowledge of the facts, which would waive the benefit of the contract with the union in his behalf. We have, therefore, a situation where the plaintiff received from week to week the wages contemplated by the contract of employment between him and the defendant, and his union unbeknown to him had made a contract for his benefit, based upon a separate consideration passing from the union, that he as a member thereof should receive a greater compensation. In payment for the labels and the use of the union name in marketing the brewery product, the defendant had agreed to pay a stated union wage to the plaintiff and to the other men working with him as members of the union. The union label had force and value, and the union had strength by reason of the moneys which it received as fees and dues from the plaintiff and other members. The plaintiff is therefore connected with the consideration and was a party intended to be benefited by the agreement. Smith v. City of New York, 203 N. Y. 106, 96 N. E. 409. It was a contract made by his representative for his benefit, and its validity is not affected by the independent agreement, express or implied, between Mm and defendant. The contracts are concurrent and neither one destroys the other. The nonsuit was therefore improper. Upon the evidence as it stood, the plaintiff was entitled to receive $18 per week for the time served. Having received only $9 per week for the time mentioned, he may recover the difference. ’ ’

In Jacobs v. Cohen, 183 N. Y. 207, 76 N. E. 5, 2 L. R. A. (N. S.) 292, it was held that a contract made by an employer and a labor union by the provisions of which the employer agreed to retain in his employ only members of a labor union who were in good standing was valid and enforceable:

The Appellate Court of the State of Ohio, in H. Blum & Co. v. Landau, 23 Ohio App. 426, in discussing a somewhat similar contract, said: “That such a contract as the one at bar is enforceable there can be no question. It clearly appears that the contract between the Garment Manufacturers’ Association and the International Ladies’ Garment Workers’ Union was a contract made for the benefit of third parties, and that one of its considerations was lodged in the purpose and intent to prevent strikes and lockouts deleterious to the contracting parties. It may be said that the plaintiff below, Rose Landau, was not a party to the agreement and therefore that she could not claim under this principle. While formerly it was necessary to have the person for whose benefit the contract was made a party thereto, yet the great weight of later decisions is to the effect that where the name of the third party does not appear to the contract, if the terms are made for the benefit of such person, the provisions of the contract are enforceable, if they are otherwise meritorious, in a legal sense.”

Appellei insisted in the trial court and. that court found that a new contract of employment was made by appellee with appellant on April 8, 1931. It is true that on that day appellee told appellant that his wages, commencing at once, were reduced from $50 to $36 per week and that he could either take it or leave it, and it is also true that appellant continued in the employ of appellee thereafter. The provisions of the Craft contract which appellee had executed provided: “It is further agreed by the employer (appellee) that no employee (appellant) will be asked to make any written or verbal contract which may conflict with this agreement.” To hold that appellee can now set up a new contract of employment with appellant made on April 8th is to hold that appellee may, at will, breach its own deliberate agreement which it had bound itself to observe and take advantage of its own wrong. The provisions of the Craft contract also bound appellee, in the event of a controversy over wages, to submit such controversy to arbitration and during the period of arbitration there would be no lockout or strike. The evidence further discloses that the by-laws of the union of which appellant was a member provided that: ‘ ‘Any member found working below the scale of wages which is in the agreement entered into between the Union and the proprietors and owners, will, upon careful investigation, be fined or suspended.” These by-laws also provide certain sick benefits for its members, payable only while the members are in good standing, and certain death benefits, payable only in the event the member was in good standing at the time of his death. If appellant therefore had not continued to work for appellee, the relation of employer and employee would have terminated and the matter of arbitration come to an end, and he would have been violating the by-laws of his union. If he had voluntarily accepted a reduction in wages, he would also have violated the by-laws of his union, subjecting him to a fine, suspension and loss of valuable rights belonging to him as a member in good standing. The weight of the evidence in this record inclines us to the opinion that the minds of appellant and appellee did not meet on the 8th of April so that appellee can now be heard to say that a new agreement was made whereby appellant consented to accept a new and lower wage scale than the one under which he had theretofore been working.

In support of its contention that a new contract of employment was made by it with appellant on April 8th, appellee relies upon the case of Langmade v. Olean Brewing Co., 137 N. Y. App. Div. 355, in which it was held that the employee could not recover on the Craft contract because he had made an independent contract with his employer in disregard of the provisions of the Craft contract. The facts in that case distinguish it from the facts in this case. As said above, we hold that it is not shown by the evidence in this record that a new, independent contract was made on April 8, 1931.

Appellee also cites the case of W. S. Snow Iron Works v. Chadwick, 227 Mass. 382. This was a suit by an employer to recover from a labor union on account of the refusal of certain of its members to go to work, and it was held that officers of a labor union cannot contract for the members of the union unless they have been expressly or impliedly authorized to do so by the members. In that case it appeared that the members of the labor union never went to work under the terms of the Craft contract, so as to them it was not a completed contract of employment. This case is to be distinguished from the other Massachusetts cases which hold that a Craft- contract was binding on the employee who worked under it as a member of the union which executed it. In Whiting Milk Cos. v. Grondin, 282 Mass. 41, 184 N. E. 379, the court enforced a provision in the Craft contract against both the labor union and the employee, which provided that a discharged employee should not interfere with the employer’s business for 90 days after his discharge.

It is interesting to compare the text of paragraph F, entitled “Contracts for Members,” appearing in 24 Cyc. 824, with the corresponding section in 63 C. J. 671 under the same heading. The article in Cyc. is as follows: “A labor union ordinarily has no authority to make a contract with employers of its members in respect to the performance of work and the payment for it. In order to bind the individual members they must expressly assent to the terms of the contract. Such assent will not be implied from the fact that they have knowledge at the time of the contract. It cannot maintain an action to enforce a contract made by it on behalf of its members. Nor is it liable to suit on such a contract, which is enforceable only against the individual members who are guilty of a breach of it. An individual member of a labor union, not being bound by the terms of the contract made between the union and its employers as to the time of payment of his wages, has a right to sue therefor on the completion of his work, in the absence of any express contract with him.” The corresponding paragraph in 63 C. J. 671 is as follows: “Workers may act in concert throug’h their union in the sale of their labor on stipulated terms, so that a union may enter into a contract with an employer for the benefit of its members. Accordingly, the union may enter into a contract with an employer prohibiting him from employing other than union labor, or using materials made up by nonunion labor, and for a breach of such contract the union may recover damages. They may voluntarily enter into an agreement giving the union the right to call a strike in order to prevent the employer from doing work for another against whom a strike is pending’, or from giving work to such an employer. The union has a right to contract for the securing of certain classes of work to its members, and such contract is not in contravention of public policy. A contract between a union and an employer binding the latter to the employment of union labor only at specified rates of wages is valid, and imposes the reciprocal obligation on the union and its members to work in accordance therewith. A contract made by a union and an employer for the benefit of employees is valid and may be enforced by an employee, even though not mentioned by name in such contract. Notwithstanding the foregoing, a trade union being the agent of a member only for the limited purpose of securing for him and all other members fair and just wages and good working conditions, it ordinarily has no authority to make a contract with employers of its members in respect of the performance of work and the payment therefor. In order to bind or confer rights upon the individual members they must expressly assent to the terms of the contract, as by entering into a contract of employment with reference to the union’s contract as a usage. Such assent will not be implied from the mere fact of membership, nor from the fact that the members have knowledge at the time of the contract. In the absence of such ratification or assent, a member cannot, as an individual, recover for a breach of any such contract. A voluntary agreement between a union and an employer pursuant to which the employer obtained workmen’s compensation insurance for the benefit of its members on the understanding that they were not required to accept it, but that, if they did, it was to be a bar to any other recovery, is not binding on an employee member accepting payments made by the insurance company, where it does not appear that such employee knew of such agreement or accepted such payments with knowledge thereof. In the absence of anything indicating assent by particular employees, a provision in an agreement between the union and the employer, regulating the terms of employment, that the contract is to remain in effect for a designated period, does not operate to fix the term of employment of employees of such employer. Hence, an individual member of a labor union, not being bound by the terms of the contract made between the union and its employers as to the time of payment of his wages, has a right to sue therefor on the completion of his work, in the absence of any express contract with him.”

In support of the statement in the text that a contract made by a union and an employer for the benefit of the employees of the employer is valid and may be enforced by an employee although not mentioned by name in such contract, the cases of H. Blum & Co. v. Landau, supra; Piercy v. Louisville & N. R. Co., 198 Ky. 477, 248 S. W. 1042, 33 A. L. R. 322; Yazoo & M. V. R. Co. v. Sideboard, 161 Miss. 4, 133 So. 669; Gulla v. Barton, supra; Gross Mountain Coal Co. v. Ault, 157 Tenn. 461, 9 S. W. (2d) 692, are cited. In Yazoo & M. V. R. Co. v. Sideboard, supra, the following language is used in the opinion: “Although only a few years ago the courts were holding that an individual member of a labor union could not maintain an action for the breach of an agreement between an employer and the union of which the plaintiff was a member in respect to wages and other rights fixed in the contract, Hudson v. Cincinnati, etc., R. Co., 152 Ky. 711, 154 S. W. 47, 45 L. R. A. (N. S.) 184, Ann. Cas. 1915B 98; West v. Baltimore & O. R. Co., 103 W. Va. 417, 137 S. E. 654; Burnetta v. Marceline Coal Co., 180 Mo. 241, 79 S. W. 136, these rulings have been left in the rear in the advancement of the' law- on this general subject, and the holdings now are that these agreements are primarily for the individual benefit of the members of the organization, and that the rights secured by these contracts are the individual rights of the individual members of the union, and may be enforced directly by the individual. Piercy v. Louisville & N. Ry. Co., 198 Ky. 477, 248 S. W. 1042, 33 A. L. R. 222; Gulla v. Barton, 164 App. Div. 293, 149 N. Y. S. 952; H. Blum & Co. v. Landau, 23 Ohio App. 426, 155 N. E. 154; Cross Mountain Coal Co. v. Ault, 157 Tenn. 461, 9 S. W. (2d) 692.”

The case of Hudson v. Cincinnati, N. O. & T. P. Ry. Co., supra, referred to in the above excerpt from the opinion in Yazoo & M. V. R. Co. v. Sideboard, supra, is cited by appellee and the case most strongly relied upon by it to sustain the judgment of the trial court. Hudson, an engineman, instituted suit to recover from his former employer $2,000, the alleged value of time lost by him from June 28, 1907, to December 1, 1908. The amended petition alleged that petitioner was discharged on June 28,1907, for an infraction of the rules of the defendant company in violation of a contract between defendant and the order of Brotherhood of Locomotive Engineers of which plaintiff was a member in good standing. The amended petition set forth this contract in full. It contained a list of stations, rates of pay, hours of service, order of seniority, together with numerous other matters, provided that the rules and regulations therein contained would be in effect two years from December 1,1906, and concluded: “In case an engineman believes his suspension or discharge unjust, he shall within ten days appeal to the superintendent by letter; and if found to have been unjustly suspended or dismissed, he shall be reinstated and paid for all time lost. The proper officers of the company will at all times listen to any complaint that enginemen as a body or individuals may wish to present, and under ordinary circumstances make prompt decision in regard thereto.” The petitioner charged that his discharge was unjust; that he, within 10 days thereafter, by letter, appealed to the superintendent of the defendant for an investigation of the charges against him, offering to submit proof of his innocence and asked for a reinstatement, but the officer refused to malee known the results of his investigations or to reinstate the plaintiff. A demurrer to the amended petition was sustained and in affirming the ruling of the trial court the Supreme Court of Kentucky held that the agents of the union in the execution of the agreement with the defendant in no way bound the individual member thereof and was not the agent of the plaintiff; that the period of service of plaintiff’s contract of employment with the defendant was indefinite and either party had a right to terminate it any time for or without cause; that defendant did terminate the contract by discharging the plaintiff and his claim, being for time lost after the determination of the contract between him and the defendant, the petition stated no cause of action. It will be observed that what the court held in this case was that the contract of employment between Hudson and his employer was indefinite as to time, and by discharging him, as it had a right to do, no provisions of the Craft contract, so far as the petition disclosed, were violated. It does not hold that a Craft contract is not enforceable when once it is shown that the member of the labor union went to work for the employer under its provisions. In the instant case the provisions of the Craft contract were violated by appellee when it sought, on April 8th, to either discharge appellant or compel him to accept a cut in his wages to $36 per week.

In Burnetta v. Marceline Coal Co., supra, also cited and relied upon by appellee, it appeared that Burnetta was a union coal miner and he brought suit against his employer for his wages. He voluntarily left the employment of the company and the company admitted it was indebted to him for the amount sued for, but contended it was not due at the time suit was instituted. The court in disposing of the question as to whether a contract made by a union and an employer in respect to rates and regulations inured to the benefit of its members said: “The Miners’ Union is not an organization for the purpose of conducting any business enterprise, but is purely one for the protection of labor against the unjust exactions of capital. The members of the union do not labor in coal mines for the organization, but each member works for himself, and whatever compensation he receives is for the benefit of himself and his family. That the Miners’ Union, as an organization, cannot make a contract for its individual members in respect to the performance of work and the payment for it, in our opinion, is too clear for discussion .... While it may be true that a labor organization may have rules requiring the employer to designate certain pay days, and if you employ a member of the organization, or even one who is not a member, and by agreement his services are to be paid on the designated pay days, as established by the rules, it could well be insisted that the contract fixes the time of payment, that is upon the theory that the individual so contracts, and by no means upon account of his being a member of the organization which has undertaken to contract for him. A contract on the part of an individual that he will perform certain work under the rules of an organization is not to be inferred from the simple fact that he is a member of the organization. Persons work for themselves, and are free and independent. Agreements imposing conditions can only be enforced when the entire proposition has been stated and by them freely accepted.” The court then cites the paragraph from 24 Cyc. 824, supra. What the Burnetta case held was that a contract is not to be inferred on the part of an employee that he will perform certain work under the rules of his labor union from the simple fact that he is a member of the labor organization.

In 13 C. J. 705, the author of the article on contracts says with reference to a promise made for the benefit of a third person that in most of the States the English doctrine that where a person makes a promise to another for the benefit of a third person the latter cannot maintain an action on it is not recognized, but it is held in most of the States of the United States that the action may lie. Many Illinois cases are cited in note 4, as sustaining this proposition. In the same volume at page 709, section 817, it is stated: “In many of the cases the doctrine is stated broadly that a person may maintain an action on a promise made for his benefit, although not a party to the contract; but this statement of the doctrine is too broad. By the weight of authority the action cannot be maintained merely because the third person will be incidentally benefited by performance of the contract; he must be a party to the consideration, or the contract must have been entered into for his benefit, and he must have some legal or equitable interest in its performance.” As supporting the text, numerous Illinois cases are cited on page 710.

In 6 R. C. L. 884, sec. 271, the author says: ‘ ‘ Stated in general terms and leaving out of view the limitations recognized in various jurisdictions, the rule is that a third person may enforce a promise made for his benefit even though he is a stranger both to the contract and to the consideration. In other words, it is not necessary that any consideration move from the third party; it is enough if there is a sufficient consideration between the parties who make the agreement for the benefit of the third party. This doctrine, originally an exception to the rule that no claim can be sued upon contractually unless it is a contract between the parties to the suit, has become so general and far reaching in its consequences as to have ceased to be simply an exception, but is recognized, within certain limitations, as an affirmative rule. ’ ’ The same authority at page 886, section 274, says: “Under the rule that a beneficiary may enforce a contract, the contract must have been intended for the benefit of a third person. It is not sufficient that the performance of the covenant may benefit a third person. It must have been entered into for his benefit, or at least such benefit must be the direct result of performance and so within the contemplation of the parties. The fact that one not a party or privy to a contract is incidentally benefited under it is no reason for declaring that the contract was made and intended for his benefit. A contract between two persons cannot be held to be for the benefit of a third from the mere fact that its breach, or negligence in discharging the duties undertaken by it, has resulted in injury to such third person. . . . Of course, the name of the person to be benefited by the contract need not be given if he is otherwise sufficiently described or designated. Indeed he may be one of a class of persons, if the class is sufficiently described or designated. In any case where the person to be benefited is in any manner sufficiently described or designated, he may sue upon the contract.”

In the instant case appellee made a valid, written contract with the Milk Wagon Drivers’ Local Union No. 753. Appellant expressly assented to its terms, entered into a contract of employment with appellee with reference to its provisions and was one of the parties intended to be benefited thereby. We believe, under the foregoing authorities, that appellant has a remedy under the provisions of that contract and that justice and fair dealing entitles appellant to recover from appellee in this proceeding the amount appellee by its agreement promised to pay him.

The judgment of the county court of DuPage county is therefore reversed and this cause is remanded with directions to that court to hear evidence as to attorney’s fees as provided in the stipulation of the parties, and to then render judgment in favor of appellant in accordance with the views herein expressed.

Reversed and remanded with directions.


source: Caselaw Access Project

author: Mr. Justice Davis

license: Public Domain

text:
    Peoples Bank of Bloomington, as Trustee of the Last Will and Testament of Fred Wolkau, Jr., Appellant, v. Helen L. Trogdon et al., Appellees.
    Gen. No. 8,825.

      Opinion filed July 26, 1934.
    Lederer, Livingston, Kahn & Adler, for appellant; Sigmund Livingston, of counsel.
    Edward Barry, Jr., guardian ad litem for Estelle Jean Trogdon and William Imri Trogdon.
    J. B. Murphy, guardian ad litem for Edwin Hites.
   Mr. Justice Davis

delivered the opinion of the court.

The complainant filed its bill in the circuit court of McLean county, seeking a construction of the will of Fred Wolkau, Jr., and the advice and instruction of the court as to its duties as trustee under said will.

A decree was entered by said court, construing the will and giving certain directions to said trustee with reference to its duties, from which decree an appeal was taken to the Supreme Court, and said court, after having determined' that no freehold was involved, directed the clerk of said court to transmit the transcript of the record and the files therein to this court, and said cause was submitted for determination at the April, 1934, term.

The testator, Fred Wolkau, Jr., was a bachelor living in Bloomington, Illinois, and departed this life on October 29, 1926. At the time of his decease he left Helen Trogdon, his niece, and Edwin Hites, her infant son, as his nearest kin, except his sister, Lena Dunn, to whom he bequeathed the sum of $1 by the terms of his will. After the death of the testator Helen Trogdon became the mother of other children, namely, Dorothy Trogdon, Estelle Jean Trogdon and William Imri Trogdon, the child, Dorothy, having died in infancy, leaving her surviving as her next of kin her father, Oda Trogdon, her mother, Helen L. Trogdon, and her brothers and sisters, Edwin Hites, Estelle Jean and William Imri "Trogdon.

By the terms of his last will and testament which was duly admitted to probate in the probate court of McLean county, appellant, the Peoples Bank of Bloomington, was named trustee and all of the property of which he died seized and possessed was devised and bequeathed to appellant in trust for various purposes.

On June 7, 1926, the testator entered into a 99-year lease with The Daily Pantagraph, demising real estate owned by him, at an annual rental of $3,000, with an option to the lessee to purchase said real estate at any time for the sum of $60,000, and the lessee entered into possession of said premises and paid the rentals during testator’s lifetime and also paid rental to the trustee after the death of testator, and thereafter said lessee served notice upon the trustee that there were certain defects in the record title and disclaimed under said- lease and refused to pay any further rentals and by direction of the circuit court said trustee sold and conveyed said real estate" to the Farm Mutual Automobile Insurance Company for the sum of $55,-000 in cash and said money was retained in a separate fund and invested in bonds of the "State of Illinois.

Paragraph 4 of section 2 of the will provides:

“I will, devise and bequeath that all of the net income which said trustee may receive from a certain lease heretofore executed by me, as lessor, and The Daily Pantagraph, as lessee, which lease is dated the 7th day of June, A. D. 1926, demising certain real estate, shall be utilized for the following purposes:

“(a) Said trustee shall pay all proper taxes upon said income; shall pay the necessary expenses of said trust, including the trustee’s fees as far as the same may be properly chargeable to this property, and out of the balance of said income it shall pay each year the sum of $25.00 to the Baby Fold, a charitable institution now located at 104-108 East Willow Street, Formal, Illinois, and also $25.00 each year to Victory Hall, an eleemosynary institution now located at 904 Hovey Avenue, Formal, Illinois, and said annual payments to said two charitable institutions shall continue from the date of my death until Edwin Hites reaches the age of thirty-five-years.

“In the event that said Daily Pantagraph, a corporation, exercises its option to purchase the aforesaid real estate under the terms of said lease, then and in that event, the purchase price so paid shall be invested by said trustee in good and properly secured loans, and the interest realized from said loans created out of said fund shall take the place of the income derived from the rentals under said lease and be applied in the same manner as is herein provided for the income from the rentals under said lease.

“(b) Out of the net income from the rentals received under the aforesaid lease to The Daily Pantagraph, dated the 7th day of June, 1926, and in the event of the exercise of the option by said Daily Pantagraph for the purchase of said property, then out of the interest and income from the fund created out of said purchase price; after the payment of the above two specific legacies to said two charitable institutions and after the payment of the proper charges against said income as above provided, the said trustee shall utilize so much of said income from said rentals, or of the income of the fund which may be created out of the purchase price of said real estate, to pay the proper and necessary expense for the care, maintenance and education of Edwin Hites until he reaches the age of twenty-one years; and from said date the entire net income therefrom, after the payment of the specific legacies above provided, shall be paid to said Edwin Hites until he reaches the age of thirty-five years; upon reaching the age of thirty-five years the corpus of said trust shall be turned over and vest in said Edwin Hites. In the event that said Edwin Hites should die before reaching the age of thirty-five years, without leaving surviving him any children living at the time of his death, then and in that event, the corpus of said trust and the income from said trust shall be considered as residuary property, and shall be considered as part of the trust created for the residuary property herein provided, and be subject to all of the provisions contained herein concerning the residuary part of my estate. ” .

Section 5 of the will provides ‘ ‘ that all the rest and residue of the income of my property, being the resid-* nary estate and containing all of the property of which I may die possessed, except the lease above re-' ferred to made between myself, as lessor, and The Daily Pantagraph, as lessee, dated the 7th day of June, 1926, shall be utilized by said trustee for the following uses and purposes.”

The will then provides that the net income of the residuary estate shall be divided into two parts, one-half of which shall be paid to Helen Trogdon during her natural life and, upon her death, to her surviving children, save and except Edwin Hites, until 21 years from the date of the death of Helen Trogdon; that said Edwin Hites shall not share in half of the income of said trust; that 21 years after the death of Helen Trogdon one-half of the corpus of said residuary trust shall be paid to the children of Helen Trogdon, who survive her at the time of her death, except Edwin Hites, who shall not share in said half of the corpus of said trust.

The other half of the net income of said residuary trust shall be utilized by the trustee for the care, support and education of Edwin Hites until he reaches the age of 21 years, and that from the time he reaches the age of 21 years the entire income shall be paid to him by said trustee until he reaches the age of 35 years, and then said one-half of the corpus of said residuary trust shall be delivered to Edwin Hites.

Among the residuary assets of which the testator died possessed was a tract of land located south of Bloomington which was improved as an amusement park and which at the time of testator’s death and since has been rented for that purpose. On March 5, 1932, a large pavilion on said land was destroyed by fire and the trustee collected $15,000 insurance on the same.

It appears from the evidence that this amusement " park will not bring any income to speak of in its pres- ■ ent condition and it will cost between $20,000 and $30,-000 to rebuild the pavilion. It was leased for $3,500 per year up to April 1, 1932, but the trustee was only offered $2,200 per year for a new lease but when the fire occurred all negotiations to rent the same were stopped. George F. Dick, the president and trust officer in charge of all trust estates of which appellant is trustee and executor, testified that in his judgment it would not be advisable to spend the $15,000 insurance money for the building of a new pavilion and that in his opinion it could not be leased for a sum equal to the interest on the investment under present conditions.

There is also a piece of property known as the Coliseum, an old building in poor state of repair and in good times the rentals ran from $1,200 to $1,800 per year but under present conditions it appears from the testimony that the rentals will not much more than pay the taxes. It is utilized for public dances and other public amusements. The trustee paid a $7,000 inheritance tax which was assessed against one legatee. All claims that were filed and allowed against the estate have been paid except a claim of the Peoples Bank which was allowed for $6,484.87, and attorney’s and executor’s fees, a total of nearly $7,000.

It is alleged in the bill that doubts have arisen because of the fact that section 4 of the will directs the application and distribution of the net income which the trustee will receive from the lease made by the testator to The Daily Pantagraph, as lessee, demising real estate in the City of Bloomington, and also providing that in the event said lessee avails itself of the option to purchase, under the terms of said lease, then the income from the purchase price shall be substituted and take the place of the rents received under such lease, and while said lease was in full force and effect at the time of the death of the testator the same was, however, canceled at the instance of the lessee and said real estate sold for a greater price than that provided for in the option; that the doubtful questions are:

Is the fund realized from the sale of the real estate and the income therefrom to take the place of the rental which would have been received under the lease from The Daily Pantagraph, and shall said fund be substituted for the fund which would have been created had The Daily Pantagraph availed itself of the option to purchase, and shall any part of said fund be utilized in the payment of claims against said estate and the general cost's of administration of said estate and this trust estate? Shall the $15,000 insurance money be utilized to build a pavilion or shall it be used in payment of debts?

Complainant seeks the advice and instruction of the court as to payment of unsatisfied claims and costs of administration and out of what specific fund the same shall be paid, and if out of various funds, then the proportion chargeable to each fund.

All legatees and devisees and all persons who can be ascertained and who may hereafter be born or be ascertained and who may hereafter have acquired any right, title or interest, vested or contingent in said trust estate or the income therefrom were made parties defendant. The court appointed Everett W. Oglevee trustee to represent the interests of persons not in being.

The court held in its decree that the trust created in paragraph 4 of the will, which provided for the income from the lease to The Daily Pantagraph, had lapsed and became ineffectual, and that the proceeds derived from the sale of the real estate mentioned in said paragraph of said will became a part of the residuary trust estate created under paragraph 5 of said will.

The court further found in its decree that the legacies to the Baby Fold and Victory Hall, provided for in subparagraph “a” of paragraph “4,” under section “Second” of said last will, had lapsed.

The court also found in its decree that the legacy, provided for in subparagraph “b” of paragraph “4” of section “Second” of the will, providing for the payment of the income from The Daily Pantagraph lease to Edwin Hites and the vesting of the corpus of said trust estate in Edwin Hites when he reaches the age of 35 years, and the interest from the income of the fund created in the event that The Daily Pantagraph availed itself of the privilege to purchase provided for in the lease, had lapsed and became ineffective.

In accordance with the decree of the court all property of the said estate is residuary property and to be administered and distributed by the trustee under paragraph 5 of section “Second” of said will.

The Peoples Bank of Bloomington, Illinois, as trustee, and Edwin Hites jointly and severally prayed an appeal to the Supreme Court from said order and decree of said court, which appeal was allowed by the court upon said trustee and Edwin Hites filing bond in the penal sum of $300 with security to be approved by the clerk. The Peoples Bank of Bloomington, trustee, executed and filed a bond which was approved, but the guardian ad litem failed to file a bond for Edwin Hites, and this case is now pending in this court on the appeal taken by the Peoples Bank of Bloomington, trustee, to the Supreme Court of the State of Illinois, and by it transferred to this court.

By the terms of section 4 of the will, the real property leased to The Daily Pantagraph was devised to appellant in trust, and two classes of trusts are established, one being charitable in its nature for the benefit of the Baby Fold and Victory Hall, and the other being for the benefit of Edwin Hites. It is apparent, also, that the income to be received from the property leased to The Daily Pantagraph is segregated and assigned for the purpose of these trusts. At the time the testator made his will the lease had been executed and the testator had no intimation that The Daily Pantagraph would subsequently repudiate the lease, it having paid rentals to the testator during his lifetime.

In order to arrive at the intention of the testator the court must take into consideration the facts and circumstances existing at the time of the execution of the will, and there can be no question but that the testator, when he made his will, was convinced in his own mind that by making this lease to The Daily Pantagraph he had assured a steady income from the property for the payments to the respective beneficiaries as provided by the will.

While it is true that the testator refers to the income as that to be received by virtue of the lease, yet he also provides that if The Daily Pantagraph should exercise its option to purchase the real estate for $60,000 then the income is to be derived out of the interest received from the funds created out of the purchase price, which by the terms of the will is to be invested by the trustee. He also provides that when said Edwin Hites reaches the age of 35 years the corpus of said trust shall be turned over and vest in him, the corpus of said trust being the real estate or, in case of its sale, the money realized from the sale of the same. It clearly appears from a reading of the will, taking into consideration the facts and circumstances existing at the time of the execution of the same, that the testator intended to give to Edwin Hites this real estate or the money realized from the sale thereof, in case of its sale, before he arrived at the age of 35 years.

In the case of O’Hare v. Johnston, 273 Ill. 458, the court held:

“This trust fund, under the directions in the will, was to be immediately severed from the residue of the estate and kept severed until the end of the 30-year period, the income, in the meantime, being given to the legatees. The gift of the whole of the interest or income from a legacy is generally held to vest the principal at the testator’s death.”

Under the will the real estate.possessed by the testator was devised to the trustee and is a freehold estate and does not lose its character as such by subsequent changes. Hull v. Ensinger, 257 Ill. 160. The law favors the vesting of estates, and in cases where the instrument is susceptible of two constructions, • the law in-dines to favor the construction most favorable to the devisee or the legatee rather than the construction that would be against his interest. Mettler v. Warner, 243 Ill. 600. The court below construed these provisions of the will as limiting the legacy to the beneficiaries strictly to the interests which they might have under the terms of the lease, and held that by reason of the cancellation of the lease such legacies lapsed and that the proceeds derived from the sale of said real estate became a part of the residuary estate created by the will. Such construction cannot be sustained. In 40 Cyc., p. 1925, a lapsed legacy is defined as follows: “A lapsed legacy or devise is one which, although good and capable of taking effect at the time the will was made, and never revoked by the testator, fails to take effect by reason of something which has occurred between the time of the making of the will and the time when the gift under the will would otherwise vest. ’ ’

It is also held, p. 1927: “As a general rule there can be no lapse after the legacy or devise has once vested.” In Glover v. Gondell, 163 Ill. 566, it is held: “The general rule is, that, if a legatee dies before the testator, the legacy lapses, because the gift does not take effect until the death of the testator, and, if the legatee is then dead he can not be benefited thereby.”

It is well settled that a trust having been established in property it will not be affected by any change of form of the trust property provided it can be identified. Woodhouse v. Crandall, 197 Ill. 104. A court of equity has power to do whatever is necessary to preserve a trust from destruction, even to supplying words to the will, which were omitted by the testator, to make clear his apparent intention. Glover v. Condell, 163 Ill. 566; Blinn v. Gillett, 208 Ill. 473; Stephens v. Collison, 274 Ill. 389; Suiter v. McWard, 328 Ill. 462.

As was said in Denegre v. Walker, 214 Ill. 113: “A court of chancery has, to some extent, a general supervision over trust estates and may direct such a disposition as in its discretion seems beneficial to all parties interested, even going- so far as to order the sale of the trust estate and a reinvestment of the proceeds without authority being given by the will, if the conditions are such that it is manifestly in the interest of the trust estate. Hale v. Hale, 146 Ill. 227; Gavin v. Curtin, 171 Ill. 640.” In Marsh v. Reed, 184 Ill. 263, the court ordered the trustee to make a 99-year lease, although in direct violation of the will which provided that no lease or demise should be for a longer time than 10 years; and the court held: “The requirement that the leasing should be for periods not longer than ten years was no doubt dictated by the belief of the donor that the rental value of the property would increase, and that the short terms of letting the property for rent would best conserve one of the ends he designed to secure, namely, to provide an income for his wife and his children. The business judgment of the donor was no doubt correct at the time, but in this instance, as is so frequently true in other cases, it is demonstrated it is not within the power and judgment of man to infallibly anticipate future events and direct that which shall be the wiser course to be pursued in after years. The question being one which relates merely to the better ór more judicious mode of managing and controlling the subject matter of the trust in order that the design and wishes of the donor may be more completely accomplished, the stringent rule, which properly obtains when the application is to divest the trustee of the title to the property which is the subject matter of the trust, and vest such title in direct opposition to the will of the donor, ought not to be given full application. ’ ’

The scheme and the intention of the testator was to impress upon the leased property a trust for the benefit of the two small charities and for the minor, Edwin Hites, and the property was devised to the trustee for the purpose of executing the terms of the trust so the trustee became vested with the title to the property and the interests of the respective beneficiaries in the trust estate became vested at the same time, and a court of chancery will maintain the trust and carry out the intention of the testator and preserve the corpus of the trust under its equitable powers. The lot or real estate which was leased to The Daily Pantagraph was, in our opinion, intended by the testator to be the real corpus of the trust, the title to which was vested in the trustee by the will, and there could be no lapse in the legacy simply because The Daily Pantagraph subsequently disclaimed the lease. The $55,000 received by the trustee from the sale of the real estate now constitutes the corpus of the trust.

It is contended on behalf of appellees, Estelle Jean Trogdon and William Imri Trogdon, that the trustee has no interest whatever in the decree, that he is simply a stakeholder and interested only in seeing that all of the necessary persons were in court and being protected in the distribution, he thus has no appealable interest in the cause and the appeal should be dismissed. Several cases are cited to sustain this contention.

We concede that under a bill filed by a trustee to construe a trust-deed or the terms of a will creating a trust, where the only matters in controversy are the rights and interests of the beneficiaries under the trust deed or will, the trustee is not generally concerned as to how those rights and interests are adjusted, but when in such a case a decree is entered which in effect destroys the trust created by the will, the trustee has such an interest as gives him the right of appeal. The situation in the case at bar is a serious and important one to the minor, Edwin Hites. By the decree entered in the circuit court the trust which the testator attempted to establish, for his benefit is wiped out, as we think, erroneously. He could not personally appeal from that decree, and his guardian ad litem in that court did not perfect any appeal in his behalf. It would be a harsh rule, indeed, to deny a trustee the right to protect the interest of his cestui que trust under such circumstances.

Counsel for appellees cite the case of Wolf v. Uhlemann, 325 Ill. 165. In that case the court upholds the general rule that a trustee must have some personal interest in suits for the construction of a will to entitle him to appeal from the decree; but in that case the court held that the trustee did have such an interest: “In this appeal appellant does not assume to represent any of the beneficiaries under the will, and while it argues the question whether the will is ambiguous and requires construction or whether it is valid in whole or in part, those questions cannot affect appellant whichever way they might be decided, but appellant was and is interested in the determination whether the remaindermen not in essé are represented in court by the parties to the suit.”

In the case of Press v. Woodley, 160 Ill. 433, the trustee appealed from a decree settling the contesting claims of adult defendants as to the ownership of a note, who did not appeal, and the court rightly held that the trustee had no appealable interest.

In the case of Ripley v. Brown, 218 Mass. 33, it was held that it is the duty of the trustees in whom the legal title to property vested, to administer the provisons of the will as directed by the testator unless they are declared invalid by a court of competent jurisdiction, and while, if no appeal had been taken, they would be protected by the decree setting aside the clause in question and establishing a resulting trust in favor of the heirs to whom the moneys forming the trust fund will be paid, nevertheless, they were persons “aggrieved” within the meaning of the statute, and they as well as the Attorney General have the right to appeal.

In Tibbatts v. Berry, 10 B. Mon. (Ky.) 473, the court held as follows:

“Have the trustees, who are to sell the land and invest the proceeds in other land to be so conveyed that at the death of the daughters, the title shall vest in their heirs, a right to abandon this duty expressly enjoined on them, and to sacrifice the interests specifically committed to their protection, at will of the heirs who have a counter interest! Nay, the question is whether they must abandon this duty and suffer the interests committed to them to be thus annihilated, because, or when, the person whose interest is intended to be secured by the will is not in being. Surely there must be some person authorized to sustain a will of. the testator, and to preserve and to protect the interest intended to be thereby created and secured; and, in the case supposed, the trustee appointed for the very purpose of carrying out the will in this respect must be authorized to maintain the will itself, which is the foundation not only of his power and duty, but of the rights and interests for the sake of which the power and duty are created. He is trustee of these powers and rights and interests, not indeed for his own benefit, but for the benefit of others. And although he may have no direct interest in any visible part of the estate or its proceeds, nor any personal pecuniary interest in the trust, he represents in effect the whole interests of others which it is his duty to maintain, and which depend for their existence on the establishment of the will. We think that such a trust is itself an interest in the will, or in the question of the will or no will, which authorizes the trustee to prove the will and to prosecute a writ of error to reverse an order rejecting it. And the principle is the same whether the intended beneficiaries of the trust are in being, or not.”

The Supreme Court of Wisconsin, in Paulson v. Paulson, 127 Wis. 612, 107 N. W. 484, held that upon a construction of a will against the contention of the executrix, she has a right to appeal, and tó the same effect is In re More’s Estate, 179 Mich. 237.

In the case of Joyal v. Pilotte, 293 Ill. 377, it is held, in a contest of a will, that it is the duty of the executor to defend it; that he is a trustee and represents all of the interests created by it, and although all of the other parties to the proceeding default he may appeal from an adverse decree. In the case of Northern Trust Co. v. Thompson, 336 Ill. 137, the trust company was one of the plaintiffs in error in a writ of error to reverse the judgment of the Appellate Court rendered in that court on appeal from the circuit court of Cook county in a case where the trust company, as trustee, filed a bill in chancery seeking the aid and direction of the court in the execution of the trust. No question was raised in the Supreme Court as to the right of the trustee to appeal, but the cause was taken and decided by the Supreme Court as if such right of appeal existed.

In Orr v. Yates, 209 Ill. 222, the trustee was an appellant in a case involving the construction of a will, and while there were other appellants from the decree, the court rendered its decision without any question as to the right of the trustee to appeal. Whatever the rule may be, under the facts and circumstances which appear in this cáse, we hold that it was not only the right but the duty of the trustee to appeal from the erroneous decree entered herein.

The court properly directed the trustee not to utilize the $15,000 insurance money for the purpose of rebuilding the pavilion which was destroyed by fire and the trustee should be authorized to use said sum, or such part thereof as is necessary, for the payment of claims against said estate and the costs of administration, including the unpaid attorney’s fees due for services of attorneys in the settlement of said estate.

The inheritance tax of over $7,000, paid by the trustee out of the residuary estate, should be borne by the various legatees in accordance with the directions contained in section 2 of the will, taking the valuation fixed by the court in assessing said tax, and after the tax due from Edwin Hites is ascertained the same may be deducted from the total tax paid and the balance of the tax should be repaid out of the half of the residuary estate of which Helen Trogdon has the life estate, and the tax due from Edwin Hites to be repaid out of the property held in trust for him, either out of the income or money borrowed for that purpose and later paid out of the income from the money held in trust for him.

Under the provisions of section 5 of the will all claims against the estate and expenses of administration are to be paid out of the residuary estate.

For the errors indicated the decree of the circuit court is reversed and the cause remanded with directions to enter a decree in conformity with this opinion.

Reversed and remanded with directions.


author: Mr. Presiding Justíce Edwards

text:
    Sears Roebuck and Company, Appellant, v. Piasa Building and Loan Association, Appellee.

      Opinion filed June 4, 1934.
    Rehearing denied August 27, 1934.
    Degen & Keamer and Terry, Gueltig & Powell, for appellant.
    Gilson Beown, for appellee.
   Mr. Presiding Justíce Edwards

delivered the opinion of the court.

In 1929, Barney Arst, being the owner of an apartment building in the City of Alton, executed a real estate mortgage thereon, in favor of appellee. In June, 1931, and August, 1931, he purchased of appellant, Sears Roebuck and Company, certain chattels, such as bathtubs, sinks, lavatories, toilet outfits and soil pipes, which were duly set up by workmen of appellant in said building, being attached after the usual manner of such goods, by screws and bolts, with the pipes through the walls, which are of brick. Arst, at the time of purchasing such plumbing utensils, executed to appellant, conditional sales contracts, in which it was recited that title and right of possession should remain in appellant until the sale price was fully paid.

In November, 1931, Arst was adjudicated bankrupt. At a hearing before the referee, relative to such bankruptcy, appellant, by its representative, asked leave to file a petition to reclaim the aforementioned articles, whereupon the trustee abandoned the real estate in question. Appellee was granted leave to foreclose its mortgage, and the parties were relegated to their remedies in the State courts. Appellee then proceeded to file a bill to foreclose the mortgage; decree was entered, sale was had, and in due course deed for the premises was delivered to appellee. Pending foreclosure, a receiver was appointed by the court. Appellant was not made a party to the foreclosure suit, and never filed a claim for mechanic’s lien.

In August, 1932, the purchase price not being fully paid, appellant started a replevin action before a justice of the peace, to regain possession of the said chattels. Judgment was entered in its favor for $493 and costs, from which appellee perfected its appeal to the circuit court, where a jury was waived and the cause heard before the court, who found the issue in favor of appellee, and from which judgment appellant has prosecuted this further appeal.

Appellee contends that the receiver in foreclosure was the proper party defendant, and that suit should have been brought against him.

It appears from the transcript of the justice that, among other entries, was the following: ‘ ‘ Continued to August 27, 1932. Agreed by parties to suit that judgment by default be entered, and if unable to agree to settlement, appeal be taken by defendant.” Herein, almost at the inception of the case, was an admission of record that the suit was properly brought, and that judgment might be entered therein, subject to defendant’s right of appeal if the parties thereafter could not agree upon settlement. After such admission, and after the cause had proceeded to judgment, appellee could not, in the face of such conduct, raise the question of defect of parties in a court of review. Eckels v. Muttschall, 230 Ill. 462. Furthermore, there appears, on page 3 of appellee’s brief, the further statement of its position, “the defense in the circuit court was that the fixtures had become a part of the realty, and that plaintiff had been guilty of laches. ’ ’ Here it is disclosed that appellee was relying solely upon the grounds mentioned in the statement just quoted, and it also is shown by the record that in the circuit court, no motion or-objection was made by appellee upon the ground that the wrong party defendant was sued. Such objection must be made in the trial, in cases like this, where the defect does not appear upon the face of the pleadings or record, and same comes too late when first urged in a court of review. Stein v. Automatic Electric Co., 152 Ill. App. 392.

The plumbing fixtures having been sold'under a conditional sales contract, title to same remained in appellant, the goods not having been fully paid for, unless it had, by conduct, estopped itself from asserting its title, of which there is no evidence in the case; Sherer-Gillett Co. v. Long, 318 Ill. 432; or unless, by their affixation to the realty, they "thereby became part of the freehold.

In determining whether chattels so attached to real estate become a part thereof, or retain their character as personalty, the test is fixed by well settled legal rules.

An agreement that an article attached to real estate shall be removable, or remain personalty, is ordinarily given full effect as against a mortgage of the realty, made previous to the affixation, in so far as this will not interfere with the security of the mortgage, where the mortgagee has not been misled and has advanced nothing on the faith of the chattels being so attached. Sword v. Low, 122 Ill. 487, 489; Northwestern Mut. Life Ins. Co. v. George, 77 Minn. 319, 79 N. W. 1028; Binkley v. Forkner, 117 Ind. 176, 19 N. E. 753; First Nat. Bank of Waterloo v. Elmore, 52 Iowa 541, 3 N. W. 547; Edwards & Bradford Lumber Co. v. Rank, 57 Neb. 323, 77 N. W. 765; Campbell v. Roddy, 44 N. J. Eq. 244, 14 Atl. 279.

In Sword v. Low, supra, it is further held, the attachment of such chattels to realty does not divest them of their character as personalty, where the parties so agree, provided their fixation is such that they may be removed without material injury to the article itself or to the freehold; and on page 500 of such case, speaking of this subject, it is said: “It may be conceded that such articles, even slightly affixed to the realty, will, in the absence of circumstances raising a contrary presumption, or evidence showing a contrary intention, be presumed to have been attached as permanent accessions to the soil; yet it is apparent, from the authorities, that however permanently attached, if removable without material injury, the intention, to be inferred from the circumstances, and the relation of the parties to each other and to the realty, or as shown by the evidence, will be of controlling and decisive importance.”

Measured by this rule, it is apparent that appellant and Arst both regarded the plumbing fixtures as personalty, and intended that they should so remain, until the price thereof was fully paid. The conditional sales contracts expressly stipulate that they were to remain the property of appellant until they were fully paid for. This is wholly inconsistent with any idea that they were intended to become part of the realty. We entertain no doubt that the parties designed and purposed that they were to be, and remain, articles of personalty until paid for, and by their attachment to the building were not to lose their character as such.

As to whether or not the articles could be removed without substantial and material' injury to the freehold, while the evidence bearing upon the subject is meager, we are of opinion that same can be done without any serious or lasting damage to the building, and that the cost of repairing, or covering the marks, or filling the holes, to be occasioned by their removal, would be trifling. The appellee would not be damaged thereby. Its loan was made upon the building as it existed before the installation of the chattels, and with no expectation that they would be placed in the structure. It acquired, by foreclosure, the same property it would have acquired if the plumbing had not been done, and its situation will not, in any way, be altered to its prejudice.

Lastly, it is argued that appellant has been guilty of laches, which should defeat its right to recovery. It appears that the trustee of Arst’s bankrupt estate abandoned the apartment building, which remitted the parties to their remedies in the State courts for the protection of their rights. Appellant had the full statutory period in which to assert its claim. Within'nine months of the time Arst became bankrupt, it had instituted this replevin action. This was moving with reasonable promptness and celerity, and appellee was not thereby induced to change its situation nor suffer any loss of rights. We do not think there is any ground shown by this record to sustain a defense of laches.

It is our conclusion that appellee is not entitled to claim the plumbing fixtures in question, as against appellant, their unpaid vendor, under its conditional sales contract. Appellant has made no claim for damages for the detention of the chattels replevied, hence, it should only be adjudged to have and retain the same.

The judgment is reversed and the cause is remanded.

Reversed and remanded.


author: Mr. Presiding Justice Edwards

text:
    Harry E. Otey et al., Appellees, v. Austin I. Westerman and United States Fidelity and Guaranty Company, Appellees, and Aetna Casualty and Surety Company, Appellant.

      Opinion filed June 4, 1934.
    Rehearing denied August 27, 1934.

      McCarty & Arnold, for appellant.
    Parker & Eagleton, for appellees Harry E. Otey et al.
    O. L. Plunkett, for appellees Trustees of Schools.
    Cooper, Eoyse, Gambill & Craweord, Samuel M. Soholeield and Carson M. Purdunn, for appellee United States Fidelity & Guaranty Co.
   Mr. Presiding Justice Edwards

delivered the opinion of the court.

This proceeding originated in the circuit court of Crawford county, upon a bill filed by Harry E. Otey and others, sureties upon the official bond óf Austin I. Westerman, treasurer of School Township Number 7, North, Eange 12, West, in Crawford county, for an accounting of the amount of liability of Westerman, as such township treasurer, growing out of his defalcations in such official capacity, to adjudge the amount which the solvent sureties should pay, and to decree that any amount adjudicated against Westerman, under his additional official bond, be paid by Aetna Casualty and Surety Company, which had executed a bond of indemnity, in favor of the complainants, together with costs, and attorney’s fees.

All sureties upon Westerman’s several bonds were made'defendants, as were also the trustees of schools of such township. The several defendants, with two exceptions, who were defaulted, answered the bill, setting forth their various contentions as to liability. In addition, the trustees of schools filed their cross-bill, charging that a part of the defalcations occurred when defendant, United States Fidelity and Guaranty Company, was the only surety on the bond, and that a part took place when both such bond and that of Otey and others were in effect, asking that an account he taken, and the respective liabilities of the several bondsmen be determined, to which cross-bill answers were filed, a hearing was had before the chancellor, who, for reasons to be hereafter discussed, dismissed the bill and cross-bill, as to the defendant, United States Fidelity and Guaranty Company; decreed that Westerman, as principal, and Otey and the other sureties, were liable under their bond of June 30, 1931, for the amount of $16,889.31, and costs; that Westerman, and one of the sureties named, Lindsay, were insolvent; that as a consequence, the full amount of the sum so adjudged be paid by Otey and his solvent cosureties, and further that appellant, Aetna Casualty and Surety Company, be held under the reindemnifying bond, for the amount so found to be due, for the use of the trustees of schools, and also found the sum of $350 to be a reasonable attorney’s fee for compláinants, and ordered same paid by said Aetna Casualty and Surety Company. From this decree, only the latter has appealed.

Most of the facts are not disputed, and the contentions arise out of the legal effects of certain acts of the parties hereto, and the interpretation to be placed upon their conduct. It appears from the evidence that Westerman, who had been township treasurer since 1924, was, in 1926, re-elected for a term of two years, and gave bond therefor in the sum of $100,000, with defendant, United States Fidelity and Guaranty Company, as surety; that on July 7, 1928, he was again re-elected as such treasurer for a term of two years, and gave a new bond in the sum of $100,000, with the same surety thereon.

On July 1, 1929, it appears that the school trustees made an order re-electing Westerman as treasurer for two years, the term to expire July 1, 1931. It seems to be conceded by all parties to this suit that there was no legal authority for this action of the trustees, and that such purported re-election of Westerman was void.

July 1, 1930, Westerman, as principal, with the United States Fidelity and Guaranty Company, entered into bond as such township treasurer in the sum of $100,000, which obligation was approved by the trustees of schools July 14, 1930. The minutes of the school trustees showed an entry, to wit: “The new bond of A. I. Westerman, Treasurer, for $100,000.00 was approved and filed. ’ ’

It further appears that on June 23, 1931, United States Fidelity and Guaranty Company served notice upon Westerman that it desired to be released from liability on account of said bond of $100,000, executed in 1928, and caused to be delivered to the president of the board of trustees, an affidavit showing this service.

Later, on June 30, 1931, the trustees at a meeting took action as evidenced by the following entry on their records: “The purpose of meeting, appointment of Treasurer for term of two years. A. I. Westerman was appointed for term of two years beginning July 1, 1931, ending July 1, 1933,” and on the same day, complainants, Otey and others, entered into bond as sureties for Westerman, in the sum of $250,000, which, on July 8, 1931, was approved by the trustees, and filed with and approved by the county superintendent of schools.

Under date of July 13, 1931, a reindemnifying bond in the sum of $50,000 was given by Westerman, as principal, with defendant, Aetna Casualty and Surety Company, as surety, to reindemnify Otey and his co-sureties, for liability upon the $250,000 bond.

In the summer of 1932, an audit of Westerman’s accounts, as school treasurer, disclosed a shortage, and on December 27, 1932, he was removed from office by the trustees, and James T. Athey appointed in his stead, qualified as such treasurer, and in the January following, this suit was instituted.

The court found, as the proof shows, that between July 1, 1927, and July 1, 1931, the defalcations of Westerman amounted to the sum of $14,541.42, while between July 1, 1931, and July 23, 1932, he embezzled $2,347.89, or a total shortage during his several terms as township treasurer of $16,889.31.

One of the controverted questions in the case is whether Westerman was, on July 1, 1930, re-elected as such treasurer, for a term of two years. It is the contention of all the parties, except the United States Fidelity and Guaranty Company, that such is the fact, while the latter urges that he was not re-elected at said time, and merely held over until July 1, 1931, when he was re-elected for the unexpired portion of the term beginning July 1, 1930, and which would end July 1, 1932.

Section 67 of chapter 122, Cahill’s Revised Statutes, 67, provides that the trustees of schools shall elect a treasurer who shall be ex oficio clerk of the board, and whose term shall be for two years, beginning and ending on the first day of July.

Section 265 of said chapter 122, Cahill’s St. if 389, states that “All school officers elected in pursuance of any general law now in force shall hold their respective offices until their successors are elected and qualified under the provisions of this Act.” These enactments were in force at the time Westerman was reelected as township treasurer in July, 1928.

The effect of these two sections is to establish the rule that the treasurer elected in 1928 held his office for two years up to July 1, 1930, and thereafter until his successor should have been elected and qualified.

The minutes of records of the trustees of schools, dated July 14, 1930, set forth that the annual report of the treasurer was presented and approved; that certain amounts, designating them, were placed to the credit of the several districts from the distributive funds, and one amount withheld therefrom, and that “the new bond of A. I. Westerman, Treasurer, for $100,000.00 was approved and filed,” and there being no further business, the board adjourned.

It will be observed that the minutes of said meeting nowhere recite that Westerman was re-elected as treasurer. One of the trustees testified, over objection, that at such meeting, Westerman was re-elected treasurer for a two-year term. However, there is nothing of record to establish the fact.

Said section 67 of chapter 122, Cahill’s Revised Statutes, IT 67, among other things, provides that the treasurer shall be ex officio clerk of the board of trustees ; that it shall be his duty to attend all meetings and keep a record of the official proceedings of the trustees, such record to be open to the inspection of any persons interested, and that all proceedings, when recorded, shall be signed by the president and clerk.

The statute thus requires all the official acts of the school trustees to be recorded and attested by the president and clerk, one of which acts of the trustees, as required by said section 67, being the election of a treasurer; hence, the official act of such election must be duly recorded, according to the terms of said section.

The law pertaining to the proof of official acts and proceedings which are required to be made a matter of record is well settled in this State. In People v. Board of Supervisors of Madison County, 125 Ill. 334, at page 342, in speaking of the evidence of the proceedings of a board of highway commissioners, the court said: “It seems clear that the same rules of law are to be applied to this corporate body in respect of its corporate action, and the evidence of such action, as are applied to other municipal corporations, and that the record of its action required by law to be made and kept, becomes the best, and if in existence and capable of being produced, the only evidence thereof.”

In City of Belleville v. Miller, 257 Ill. 244, at page 246, where the court had under consideration the matter of the manner of proof as to what had taken place at a meeting of the, board of local improvements, it stated the rule to be, “Where the law requires public records of proceedings to be kept, as it requires in this case, the records of the board of local improvements to be kept, such records cannot be contradicted, added to nor supplemented by parol evidence. ’ ’

It is manifest from the authorities cited that the records of proceedings of the trustees of schools is the only manner in which their official actions can be proven, and particularly where, as in this case, they are in existence, and capable of being, and in fact, were produced. Hence, it is evident that the oral testimony of one of the trustees to the effect that at the meeting of July 14, 1930, Westerman was re-elected treasurer, for a term of two years, was not competent proof of such fact.

Moreover, the failure of the record to affirmatively show that such election took place at said meeting, is, of itself, evidence that no such election occurred. • In People v. Toledo, St. L. & W. R. Co., 270 Ill. 472, at page 473, where the question was whether a board of commissioners of highways had held a meeting, the court in considering and discussing the question said: “The appellant contends that a record of the proceedings by the. Commissioners was required to be kept, and that failure1 of the record to show the meeting required by law is proof that no such meeting was held. If the Commissioners were required to keep a record of their proceedings there is no doubt that their action could be proved by the record alone, and the failure of the record to show any action would be evidence that no such action was had.” The law requiring that a record of the treasurer’s election be kept and had, and the minutes not showing such election, is, of itself, evidence that the treasurer was not re-elected at such time.

Upon this record, it appears not only that there is no competent evidence that Westerman was re-elected treasurer on July 14, 1930, but, on the contrary, there is evidence that he was not so re-elected.

We think it clear that Westerman has not been proved to have been re-elected upon said date, and that he thereafter was holding over, under the election of 1928, and continued so to hold until June 30, 1931, when the record shows the trustees re-elected him, as they supposed for a term of two years, but which could only be for the unexpired portion of the two-year term which should have begun July 1, 1930. 46 Corpus Juris, 976, sec. 127; Donovan v. State Board of Labor, 225 Mass. 410, 114 N. E. 679; Wilson v. Shaw, 194 Iowa 28, 188 N. W. 940; State v. Galusha, 74 Neb. 188, 104 N. W. 197.

It follows that whether the bond of the United States Fidelity and Guaranty Company, dated July 1, 1930, for $100,000, be held to be in lieu of the one for like amount, furnished in 1928, or whether it was cumulative thereto, the United States Fidelity and Guaranty Company was liable for the defaults of Westerman up and until July 8, 1931, when the bond for $250,000, given by Otey and others, was approved, whereupon its responsibility, as such surety ceased, and it was not thereafter answerable for any defalcations of the treasurer. Cahill’s St. ch. 122, 11389; 46 C. J. 1072, sec. 408.

If, however, the theory be adopted that the United States Fidelity and Guaranty Company, by service of its notice of June 23, 1931, evidencing its desire to be relieved of liability under the bond for $100,000, given in 1928, was absolved from further liability 10 days thereafter, as provided by section 10 it could make no difference in the decision of the case, for the reason that 10 days from June 23rd would carry it to July 3rd, and the evidence shows that no defalcations occurred between July 3, 1931, and July 8, 1931, when the $250,000 bond was given and approved; hence, it Avould be holden under its 1928 bond, at least until July 3, 1931, and the effect of giving- the 1930 bond, or its legal status, would be immaterial.

It is thus evident that the United States Fidelity and Guaranty Company, in any event, is, under its bond of 1928, and those given for the preceding terms of Westerman’s incumbency as township treasurer, liable for any defalcation of which he might be guilty occurring before July 3, 1931 (Cahill’s St. ch. 122, II 389; 46 C. J. 1072, sec. 408), unless it had in some manner been legally discharged therefrom, or an estoppel had arisen in its favor, as it contends is the case.

On page 50 of its brief and argument, the United States Fidelity and Guaranty Company states its claim to an estoppel as folloAvs: “Under the law of Illinois, it is universally held that where a public officer, at the end of his term, makes a report showing he has on hand all of the public funds for which he is liable to account, which report is accepted and approved by the proper authorities, and the officer is reelected and executes a new bond, the officer and the sureties on the last bond are estopped to say that the sums shown in the report of the officer to be in his hands at the time the report was approved, were not actually in his hands ’ ’; that such is the law appears to be established by the authorities. Cowden v. Trustees of Schools, 235 Ill. 604; Longan v. Taylor, 130 Ill. 412; Morley v. Town of Metamore, 78 Ill. 394.

On page 51, the application of the rule to the instant case is stated to be “ The evidence shows that on July 8, 1931, at the first meeting following the reappointment of Westerman as School Treasurer on June 30, 1931, the defendant Westerman presented his annual report to the Trustees of Schools, which showed that he had on hand all sums for which he was then accountable, and that such report was approved.” If this be a correct recital of the facts, it is, within the rule as stated, an estoppel in favor of the United States Fidelity and Guaranty Company, as against the surety on the $250,000 bond, approved July 8, 1931, as well as the surety on the $50,000 reindemnifying obligation.

In order to determine this contention, it is necessary to discuss both the evidence bearing upon the point, and the statutes in force at the time of the transaction.

The matter of reports on the part of the school trustees and the township treasurer is regulated by sections of the School Law. By section 36 of the Act, Cahill’s St. ch. 122, ft 36, the trustees are required to prepare or cause to be prepared by the treasurer, a statement of the condition of the schools, on or before July 15th annually, and file same with the county superintendent of schools. Section 77, Cahill’s St. ch. 122, 77, commands the treasurer to deliver to the county superintendent, on or before June 30th annually, a statement showing the ‘‘ exact condition of the township funds,” to be verified by affidavit of the treasurer. In section 79, Cahill’s St. ch. 122, ft 79, is a requirement that the treasurer present to the trustees, at their meeting following the annual election, a complete exhibit of the fiscal affairs of the township and of the several school districts.

By section 78, Cahill’s St. ch. 122, ft 78, the treasurer was also required to submit a report to the trustees on the first Mondays of April and October, showing the financial assets and income of the township, also submit for their examination, all books, papers, notes, etc., which he held in his official capacity.

It appears from the proof that each year, during his incumbency, Westerman prepared, evidently at the direction of the trustees, their annual statement, which he caused to be filed with the county superintendent. Each of these, on its face, purports to be the act of the trustees, and does not assume to be a report of the treasurer. They are unverified, whereas the report of the treasurer was required to be supported by his affidavit. It is manifest that they were the reports of the trustees, contemplated by said section 36, and not those of the treasurer as required by section 77.

It appears from the records of the trustees’ meetings, that Westerman presented his reports to the trustees from time to time, and that same were approved, but with the exception of the semiannual report of April 8, 1929, not one is recorded as showing any definite amount of funds in the treasurer’s hands. The reports themselves were not offered in evidence, and the minutes of the proceedings .of the trustees’ meeting were the only testimony in the case bearing upon the proposition.

As previously observed, the United States Fidelity and Guaranty Company claims that at the trustees’ meeting of July 8,1931, the treasurer’s report was presented and approved; that same showed in his hands all school funds, for which he was accountable.

The minutes of such meeting were as follows: “Trustees met in regular meeting. Report of A. I. Westerman Treasurer ending July 30, 1931 was presented and approved. The bond of A. I. Westerman as Treasurer in the sum of $250,000.00 was presented and approved and filed with County Superintendent. No further business, board adjourned.”

That the treasurer filed his report, and that same was approved, is thus established by the record. However, it nowhere appears that he, at the time, had on hand all the public funds with which he was chargeable, nor does it show that he then held any certain or definite amount of such moneys. For aught that is disclosed by the minutes, the report might have shown that he held in hand but a small amount of public money, or perhaps no funds at all. The contents of the report, and what it would have revealed as to the state of finances in the treasurer’s hands, are not known, nor do the minutes purport to state that the board of trustees found the treasurer in possession of all funds which should have been in his hands. They merely approved his report, whatever it might have been, and whatever it might have disclosed.

We have no evidence of the contents of the report, and cannot know whether or not he was reporting, as in his hands, all funds with which he was chargeable.

One of the requirements of the rule invoked is that the report shall disclose- the officer held, in official possession, a certain amount of money, and that such was the total sum for which he was accountable (Cowden v. Trustees of Schools, supra). This necessary element is entirely lacking upon this record, which impels us to the opinion that the sureties upon the $250,000 bond given by Otey and others, July 8, 1931, and the Aetna Casualty and Surety Company, surety upon the $50,000 reindemnifying, obligation, are not estopped to assert that Westerman did not have on hand at such .time the full amount of school funds which properly should be in his hands, as such treasurer.

The total amount of Westerman’s defalcations, as such school treasurer, was $16,889.31, of which $14,541.42 was embezzled by him prior to July 3, 1931, and during the time the bonds of the United States Fidelity and Guaranty Company were in force and effect, and the balance, or $2,347.89, he wrongfully converted after the bond of Otey and cosureties had been approved July 8, 1931, and the reindemnifying obligation of the Aetna Casualty and Surety Company had been executed.

It is our conclusion that Westerman and the United States Fidelity and Guaranty Company are liable on their several surety bonds for the defalcations amounting to said sum of $14,541.42; that Westerman, Otey and the other sureties on the $250,000 bond of July 8, 1931, are holden for the remaining conversions in the amount of $2,347.89, but that John H. Lindsay, one of such sureties, being insolvent, said amount be apportioned among the remaining sureties, and that the latter are entitled to be reimbursed from appellant, Aetna Casualty and Guaranty Company in said amount, together with costs and $350 attorney’s fees, as found by the trial court.

The decree is reversed and the cause is remanded with directions to enter a decree in conformity with the views herein expressed.

Reversed and remanded toith directions.