author: Mr. Justice Gridley

text:
    Chester R. McNeil, Appellant, v. Edwin M. Bulkley et al., Trading as Spencer Trask & Company, Appellees.
    Gen. No. 36,092.
    Opinion filed December 30, 1932.
    Rehearing denied January 11, 1933.

      Justus Chancellor and Justus Chancellor, Jr., for appellant.
    Cutting, Moore & Sidley, for appellees; James F. Oates, Jr., and John Paulding Brown, of counsel.
   Mr. Justice Gridley

delivered the opinion of the court.

In an action on the case, commenced January 13, 1931, to recover damages for claimed fraud and deceit in the sale of certain bonds by defendants to plaintiff on November 23,1916, there was a trial without a jury resulting in the court, on February 24, 1932, finding defendants not guilty and entering judgment against plaintiff for costs. The present appeal followed. The bill of exceptions discloses that the trial judge, when making the finding, stated that he would not decide whether or not the misrepresentations upon which plaintiff claimed to have relied, as to the law of the State of Louisiana, had been made by defendants, or whether or not that law was in fact as represented by them, but that “the court has felt from the outset that the Statute of Limitations is a bar in this case.”

Plaintiff’s declaration consisted of two counts, to which defendants filed a plea of the general issue and a special plea that the supposed causes of action “did not, nor did any or either of them, accrue to the plaintiff at any time within five (5) years next before the commencement of this suit.” In the first count it is alleged in substance that “shortly prior to the year 1927” defendants, being engaged in the business of investment bankers at Chicago, offered to sell to plaintiff eight (8) — $500 drainage bonds, of a total series or issue of 600 bonds, of the “Avoca Drainage District, Parish of St. Mary, State of Louisiana,” and then and there “falsely and fraudulently represented to plaintiff, ’ ’ to wit: That the bonds were issued pursuant to an act of the legislature of Louisiana to obtain moneys to drain lands in subdrainage district No. 1, in said State, and place them under cultivation; that a tax of $2.05 an acre would be levied annually by the board of drainage commissioners to pay the interest accruing on the bonds and the yearly instalments of principal; that the average selling price of reclaimed land in the district was upwards of $100 an acre; that the taxes were due on January 1st of each year and if not paid on or before July 1st, would become delinquent, and the property would be offered for sale, and if the property was not sold for the amount in arrears it “would be adjudicated to the State”; and that “upon such a contingency the State of Louisiana would he liable in exactly the same manner for the payment of the taxes for that year and subsequent years as any property holder in the district.” It is further alleged that the representations were known to be false by defendants and made for the purpose of inducing plaintiff to purchase the bonds; that he, relying* upon the representations, purchased them and paid defendants therefor $3,876.80; that subsequently, in the year 1927, defendants informed Mm that the district had not collected the taxes and was in default in the payment of interest and instalments of principal and that a committee had been appointed to protect all bondholders, and requested Mm to deposit his bonds with it and to authorize it to take such action in the premises as it might deem advisable; that plaintiff “declined to deposit Ms bonds” with the committee, “caused an investigation to be made” as to the truth of defendants’said representations at the time of the sale, and “found them to be false, untrue and without foundation in fact”; that said committee purchased the lands in' the district that had been forfeited to the State of Louisiana and undertook to carry out the obligations of defendants with reference to the development of the lands and the payment of interest and maturing principal; that since said time the committee has defaulted in the payment of interest on the bonds and in the payment of taxes on the lands; that plaintiff has unsuccessfully demanded of defendants the return of the moneys he paid to them; and that by reason of the premises plaintiff has been defrauded and has suffered damage, etc.

In the second count it is alleged that “shortly prior to the year 1927,” defendants falsely and fraudulently represented to plaintiff, to wit: That they had for sale certain bonds issued by St. Mary Parish — Avoca Drainage District of the State of Louisiana, that they were valuable bonds, and were well secured in this, that if the drainage district for any reason defaulted in the payment of interest or principal “the State of Louisiana was behind the bonds and was obligated to pay the taxes on the lands just the same as the private owner was required to do”; that the bonds “were an obligation of the State of Louisiana, and that they had an opinion of Judge B. E. Milling to that effect”; that thereafter the district made default in the payment of the interest and instalments of principal due on the bonds; that thereafter defendants appointed a committee (naming them) as a bondholders’ committee, “for the purpose (as then stated by defendants) of taking means to protect the owners of the bonds, ’ ’ and “entered into an agreement with said committee, employed by the law firm of Judge Milling, to take action to protect the owners of bonds and to obtain payment”; that one feature of the agreement was that the deposit of the bonds “prevented the owner of said bonds from taking any action whatsoever with regard to rights that may have accrued to him out-of the purchase and ownership thereof”; that plaintiff refused on defendants’ request to deposit his bonds with the committee, and demanded of defendants that they return to him the moneys he had paid for them, which demand they refused; that plaintiff’s bonds are absolutely worthless; and that because of the false and fraudulent representations aforesaid defendants obtained from him in cash the sum of $3,876.80, which sum together with interest defendants, although often requested, still refuse to return to him, to his damage, etc.

On the day of the commencement of the trial plaintiff, by leave of court, filed a new paragraph to his declaration (to which count does not clearly appear) and it was ordered that defendants’ plea of the general issue and special plea of the statute of limitations, previously filed, stand as pleas to the declaration as amended. The new paragraph is in substance as follows: That defendants, for the purpose of “concealment” and “keeping plaintiff in ignorance of the said frauds” practiced upon him, “paid the interest” on his bonds as the same from time to time matured, and thereafter for the same purpose “conspired and confederated with the Mississippi Valley Trust Co., and others to plaintiff unknown,” and formulated a bondholders’ protective committee, “prolonging the time of payment of interest and other obligations to plaintiff until the fall of 1927,” when plaintiff “caused an investigation to be made of the representations aforesaid with the result that he ascertained for the first time that the same were untrue”; and that he was forced to incur large expenses, etc.

On the same day plaintiff, by leave of court, filed an amended replication to defendants’ plea of the statute of limitations, wherein he averred that during the period of the running of the statute defendants, for the purpose of keeping plaintiff in ignorance of the frauds practiced, “paid the interest on plaintiff’s bonds,” and for the same purpose thereafter “confederated with the Mississippi Valley Trust Co., and others to plaintiff unknown, and organized a bondholders’ protective committee which pretended to collect the interest on said bonds and take proceedings necessary to enforce the supposed liability of the makers of the bonds and of the State of Louisiana”; and that thereby plaintiff was “kept in ignorance” of the' frauds practiced as' aforesaid, “until the fall of 1927, when plaintiff caused an investigation to be made and then, for the' first time, ascertained the falsity of defendants’ representations as aforesaid.”

On the trial plaintiff testified in his own behalf and four other witnesses testified: for him, including1 James L. Cooke (a bond salesman- of defendants in Chicago, who as agent sold the eight bonds to plaintiff), and Charles W. Stuart (an employee of defendants, who in the fall ofo 1921 viewed the lands of the district for a day, investigated• the ownership thereof as far as he could, and made a written report to-defendants) and Justus Chancellor (plaintiff’s attorney, who in the fall of 1927, examined the laws of the State of Louisiana in connection with plaintiff’s bonds, and in April, 1928, made a report to his client); Plaintiff also introduced in evidence the eight bonds, defendants’ printed circular or prospectus used' in the sale of the bonds, and a mass of correspondence and other writings. At the conclusion' of plaintiff’s evidence the court made the finding and entered the judgment, upon the sole ground that plaintiff’s action was barred by the statute of limitations of five years.

Plaintiff’s evidence disclosed the following facts in substance: The bonds -bore interest at five per cent, evidenced by coupons' payable on February 1 and August 1 of each year. All interest was paid to plaintiff up to and including ■ February -1, 1923. Interest maturing on August -1, 1923, and thereafter, was not paid. Each bond stated on its face that it is issued subject to certain provisions of the Constitution of Louisiana and certain acts' of the legislature. Plaintiff purchased the bonds' from Cooke, defendants ’ salesman, on November 23, 1916. He was a man of considerable business experience, — being the vice president of a manufacturing corporation. He had purchased many bonds of defendant and other bond houses for investment. When Cooke offered the bonds he gave him the circular or prospectus concerning them, but made no representations other than those contained in the circular, which was undated and which at the top had the name of defendants’ firm “Spencer Trask & Co.,” and the statement “Preliminary Circular Subject to Change.” Plaintiff testified that the “only reason” he purchased the bonds was because of certain statements or representations contained in the circular under the cáption “Collection of Taxes,” the material parts of which are as follows (italics ours):

“The collection of these taxes is provided under Section 14 of Act No. 317 of the Statutes of 1910, as amended by Act No. 227 of the Statutes of 1914. . . .

“Taxes are due on January 1st of each year. If on July 1st of any year such taxes have not been paid, the same become delinquent and the property must then be offered for sale by the State authorities. If the property cannot be sold for the amount of arrears, or if there is no bidder for the property, the land upon which the taxes are in arrears is adjudicated to the State, and the State becomes liable in exactly the same manner for the payment of the taxes for that year as any property holder in the district. The State authorities are also obligated to make provision for the payment of such arrears in exactly the same manner as any appropriation would be made for State purposes. This adjudication to the State is subject to the right of the former property owner to redeem such property within one year from the date that taxes become delinquent. . . . If at the end of one year said property has not been redeemed by the former land owner or resold the title becomes vested in the State of Louisiana. The State then becomes a property owner in the district, and is subject to the same taxation as any individual property oivner within said district.

“The Avoca Drainage District was one of the first to he formed under the above Act, and was validated through a suit carried through the lower courts and the Supreme Court of Louisiana. The decision of the courts was in favor of the district, and 'rendered all taxes incontestable from any source whatsoever.”

Other statements or representations in the circular are in part as follows (italics ours):

“These bonds are a direct obligation of Sub-Drainage District No. 1, and are issued to cover the cost of draining the lands and placing them in condition for cultivation. ... To provide for the payment of semi-annual interest and the yearly installments of principal, a tax of $1.55' per acre is levied annually by the Board of Drainage Commissioners. In addition, a tax of 50 cents per acre is levied to provide for the operation of the pumping plants and the maintenance of the drainage system. This total tax of $2.05 per acre compares with the maximum allowance under the statutes of $3.50.per acre per year. The average selling price of reclaimed land in this district is upwards of $100 per acre. . . .

“Avoca Drainage District is situated about 80 miles west of New Orleans and the Mississippi River, in St. Mary’s Parish, one of the oldest and most prosperous parishes (counties) in Louisiana, and is directly opposite the City of Morgan City. . . . Sub-Drainage District No. 1 covers an area of about 16,600 acres, and is connected with Morgan City by a new steel draw-bridge over the Bayou Boeff. The district is practically an island, being surrounded on all sides by navigable streams, which range in depth from 20 to 40 feet, and empty into the Gulf of Mexico, 20 miles to the South.

“The United States Government has recently expended over half a million dollars in deepening the waterway extending to the Gulf of Mexico, thus making Morgan City a port of entry, and permitting ocean going vessels to take the products of the soil directly from the 24 miles frontage of the District to any seaport.

“The District was organized in 1910 and actual work began January 15, 1911. The system of drainage was approved by and carried out under the supervision of the State Engineering Department, and has been pronounced by it one of the best drainage prefects in Louisiana. The work is now practically completed, and while only about 4,000 acres are actually under cultivation at this time, practically the entire area is ready for planting, and will no doubt be cultivated within a short time. . . . The land is exceptionally fertile. . . . Crop values range from $50 to $200 per acre, — the soil producing as high as 77 bushels of corn or 40 tons of sugar cane to the acre. The population of the district (now about 700) should increase rapidly now that the drainage work has been completed. . . .

“The legal details in connection with these bonds have been under the supervision of Judge R. E. Milling . . . of New Orleans, have been tested and approved in the Supreme Court of Louisiana, and their legality has also been passed on by Messrs. Wood & Oakley of Chicago.

“The statements made in this circular are from official sources, or from others which we regard as reliable, and are the expression of our beliefs.

(Signed) Spencer Trask & Co.

Chicago.”

Plaintiff further testified that just prior to his purchase of the bonds he discussed with Cooke many of the statements contained in the circular and particularly the statements under the caption “Collection of Taxes” and that Cooke then “advised me that in the final analysis the State of Louisiana was liable for the interest and principal of the bonds in case the District defaulted.” But it clearly appears from plaintiff’s letter to defendants, dated August 30, 1927 (i. e., nearly 11 years after he had purchased the bonds and about 4 years after all interest payments on them had ceased) that plaintiff when he purchased the bonds relied wholly upon the statements in the circular and not upon any advice given or opinion expressed by defendants’ salesman, Cooke. In the letter plaintiff wrote: „

“The facts of the matter are I purchased $4,000 Avoca Drainage Dist. Bonds from your representative, the sale being predicated upon the statements contained in your circular. It was stated that the State of Louisiana would be legally liable for the payment of the bonds in case of a default of the drainage district. Evidently this statement was in error. That being the case, I ask that you repurchase the bonds and pay the interest in default. I would dislike the idea of having a suit over this matter, but if it is to be contested will give the matter to my attorney as soon as your reply is had. In conclusion, permit me to say I would not be the owner of these bonds if it were not for the statement in the circular holding the State of Louisiana responsible in the finality.”

Plaintiff’s evidence further disclosed that several months after the default in the payment of the interest due on the bonds on August 1, 1923, a bondholders’ protective committee was organized, consisting of representatives of certain parties, including defendants, who about eight years before had brought out the issue. About May 1, 1924, plaintiff was informed by defendants’ letter of the committee’s organization and that, in view of the continued defaults in the payment of interest, etc., it was advisable that concerted action be taken to protect the interests of all bondholders, and he was urged to- deposit his bonds with the committee. A form letter was inclosed, signed by the committee, dated May 1, 1924, in which it was stated that the formation of the committee had become necessary because of certain facts in substance that a majority of the lands in the district had, been adjudicated to the State of Louisiana for the taxes of 1922, which taxes had not been paid for that year or the succeeding year (1923), that the period of redemption for the year 1.922 taxes would expire about June 24, 1924, that there then would arise the question whether the title would remain in the State (a condition to be avoided if possible), and that concerted action by all bondholders should immediately be taken to provide for the redemption of the bonds and to work out a plan, by bringing new taxpayers upon the land and by other means, whereby the tax deficiency might be made up and the defaulted interest coupons and matured principal be paid. About July 16, 1924, plaintiff also received by mail a printed copy of the proposed bondholders ’ protective agreement, in which the above and other facts were set forth. It therefore appears that by July, 1924, plaintiff had notice and knowledge of the situation, and that the State of Louisiana was not going to pay the taxes on the lands in default of their payment by the respective owners. Yet he did not) see fit to join with other bondholders and become a party to the bondholders’ agreement. In fact, he stood by and did practically nothing until the summer of 1927 (a period of three years) when, being in New York City, he called at defendants’ office there and demanded the return of the money he originally had paid for the bonds with accrued interest, which demand was refused. After returning to Chicago he wrote the letter of August 30, 1927, above mentioned. And during the fall of that year he retained an attorney, Justus Chancellor, to investigate and report “whether or not I could collect the amount of money I had invested in the bonds.” Chancellor testified that he made an investigation into the matter, studied the laws of Louisiana, reviewed numerous decisions of the Supreme Court of that State, and in “the spring of 1928” made a report to plaintiff, in which he expressed the opinion in substance that the ' State of Louisiana was not liable to pay taxes on the lands of the district and “was not in the business of paying taxes,” and that it could not be held liable to pay plaintiff’s bonds. The present action was not commenced by plaintiff until January 13, 1931, nearly three years after Chancellor had made his report, and over six years after plaintiff had been notified by defendants that the State of Louisiana was not liable to pay taxes on any lands in the district. And it is to be noticed that the “advice” claimed to have been given to plaintiff by Cooke, or the particular statements relied upon by plaintiff as contained in defendants’ circular, received by plaintiff prior to his purchase of the bonds, were mere expressions of opinion on questions of law. And it is well settled that ‘1 ordinarily one is not liable for false representations respecting a mere question of law.” (Dillman v. Nadlehoffer, 119 Ill. 567, 577; Fish v. Cleland, 33 Ill. 238, 243; Upton v. Tribilcock, 91 U. S. 45, 50.)

After carefully reviewing plaintiff’s evidence, we are of the opinion that the finding and judgment of the superior court, on the ground that plaintiff’s cause of action for claimed fraud and deceit was barred by the statute of limitations of five years, were right, and that the judgment should be affirmed. In section 15 of our Limitations Act (Cahill’s St. 1929, ch. 83, ¶ 16, p. 1672) it is provided in part that “Actions on' unwritten contracts, expressed or implied, ... or to recover damages for an injury done to property, real or personal, . . . and all civil actions not otherwise provided for, shall be commenced within five years next after the cause of action accrued.” In Bates v. Bates Machine Co., 230 Ill. 619, 621, it is decided that as there is no specific provision in our Limitations Act concerning actions on the case for fraud and deceit (of which the present action is one) such actions are governed by said section 15 and are barred in five years. (See, also, Keithley v. Mutual Life Ins. Co., 271 Ill. 584, 592.) In section 22 of the act, Cahill’s St. ch. 83, ¶ 23, it is provided that “If a person liable to an action fraudulently conceals the cause of such action from the knowledge of the person entitled thereto, the action may be commenced at any time within five years after the person entitled to bring the same discovers that he has such cause of action, and not afterwards.” In the Keithley case, supra, which was an action on the case for fraud and deceit, after reviewing several prior decisions of our Supreme Court, it is said (p. 594, italics ours): “The doctrine announced in these decisions is, that the fraudulent concealment .of a cause of action which will prevent the running of the Statute of Limitations must be some affirmative act or representation intended to prevent the discovery of the cause of action, which does actually prevent such discovery; that a replication setting up such fraudulent concealment must get - out the facts constituting the concealment; that the fraudulent misrepresentations which form the basis of the cause of action do not constitute h fraudulent concealment in the absence of ..allegations of acts or representations tending fraudulently to conceal the cause of action; that the rule that the statute begins to run only from the discovery of the fraud does not apply when the party affected by the fraud might with ordinary diligence have discovered it; . . . ” (See, also, Skrodzki v. Sherman State Bank, 348 Ill. 403, 407; Lancaster v. Springer, 239 Ill. 472, 482.) In Ramsey v. Child, Hulswit Co., 198 Mich. 658, a fraud and deceit case where a similar statute was invoked, it was held in substance that there was no fraudulent concealment of a cause of action of fraud in the sale of certain bonds, so as to make available the provisions of the statute, where a purchaser of the bonds from a bond house did not receive interest on her coupons at the time they were due and was afterwards informed that the enterprises- were in serious financial straits, and the organization of bondholders’ protective committees was urged, and such organizations -were perfected, and she- otherwise received information that should have put her upon inquiry. In its opinion the Supreme Court of Michigan used language which we think is peculiarly pertinent to the facts of the present case, viz. (p.. 669): “An analysis of the notifications and proceedings relative to the bondholders’ protective committees does not impress us -that they were designed, • or could have had the effect to conceal the cause of action, but -rather to reveal it. The effort-seems to have been to induce plaintiff, notwithstanding the ground for action revealed, to hold •to her investment and take her chances in the ultimate outcome. This is by no means concealment. . . . (p. 671, italics ours.) While regretting the situation in which- appellant now finds herself, we cannot escape the conclusion that Miss Ramsey, if not with positive knowledge of the falsity of the representations which she claims induced her to make her unfortunate investment, at least with an abundance of information which should have led to a prompt investigation, slept on her rights and chose rather to await the results of the efforts of the committees to save for the bondholders at least a portion of the face of their bonds; and that having been disappointed in the outcome of the course she elected to pursue, she now brings a belated action and seeks to induce the court to relieve her from the situation in which she finds herself by her oivn negligence. We think the attitude of the courts on this subject is well expressed in the following language of Justice Swayne of the Supreme Court of the United States in the case of Wood v. Carpenter, 101 U. S. 135 (139):

‘1 ‘ Statutes of limitations are vital to the welfare of society and are favored in the law. They are found and approved in all systems of enlightenéd jurisprudence. They promote repose by giving security and stability to human affairs. An important public policy lies at their foundation. They stimulate to activity and punish negligence. While time is constantly destroying the evidence of rights, they supply its place by a presumption which renders proof unnecessary. Mere delay, extending to the limit prescribed, is itself a conclusive bar. The bane and antidote go together. ’ ”

We fail to find in the present transcript sufficient evidence, or indeed any evidence, showing that defendants, with intent to defraud, concealed from plaintiff any cause of action, that he might have had against them by reason of the sale of the eight bonds to him. It is alleged in substance in the amendment to plaintiff’s declaration, as well as in his replication to defendants’ plea of the statute of limitations, that for the purpose of fraudulently concealing from him the fact that he had a good cause of action for fraud and deceit against them, they “paid the interest” on the bonds as it matured on several occasions prior to the default in such payment in August, 1923, and much is attempted to be made of this fact in the printed argument of plaintiff’s counsel filed in this court. But even if it be considered (for the sake of the argument only) that the acts of defendants in so doing amounted to such a fraudulent concealment, it cannot be of any avail to plaintiff in this belated action, which was not commenced until January 13, 1931. When the payment of the interest ceased in August, 1923, and was not resumed, there could in August, 1923, and thereafter, be no concealment of plaintiff’s cause of action for this particular reason. And plaintiff’s action was not commenced until nearly eight (8) years after the last payment of interest was made in February, 1923.

For the reasons indicated the judgment of the superior court, appealed from, should be affirmed and it is so ordered.

Affirmed.

Keener, P. J., and Scanlan, J., concur.


source: Caselaw Access Project

author: Mr. Justice Scanlan Keener, P. J., and G-ridley, J.,

license: Public Domain

text:
    Bank of Taylorsville, Appellee, v. Charles R. Blyth et al., Trading as Blyth & Company, Appellants.
    Gen. No. 36,019.

      Opinion filed December 30, 1932.
    Rehearing denied and opinion modified January 19, 1933.
    Chapman & Cutler, for appellants; Charles M. Thomson, of counsel.
    Loucks, Eckert & Peterson, for appellee.
   Mr. Justice Scanlan

delivered the opinion of the court.

In a trial before the court in an assumpsit suit, there was a finding for plaintiff and damages were assessed at $2,997.50. From a judgment for that amount defendants have appealed.

Defendants are investment bankers and brokers, doing business in Chicago. Plaintiff bank is located at Taylorsville, Kentucky. .In April, 1929, E. A. Reid, its cashier, purchased, through the defendants, 100 shares of Sinclair Oil stock for $4,004.27. Defendants then drew a draft on Reid for that amount and deposited it, with the certificate for the stock attached, in the Continental Illinois Bank & Trust Company, of Chicago, for collection. That bank credited the account of defendants with the amount of the draft, with' the customary understanding that if the draft was not paid the bank would charge the amount of the same against defendants’ account, and with the further understanding that if the draft .was paid the payment would be noted on the books, of the bank, but defendants would not be notified of ■ the payment. Plaintiff admitted that upon the receipt of the draft Continental bank attached it and the stock certificate to what is known as a collection letter, the latter being in duplicate, and sent the draft, the certificate and the duplicate collection letters by registered letter addressed to.the Bank of Taylorsville, at Taylorsville, Kentucky, and that the duplicate collection letters contained the following: “We enclose for collection and returns . . . draft on E. A. Reid . . . amount due $4004.27 . . . depositor, Blyth & Go. . . . 100 Sinclair Oil Attd. with Exch. Wire non payment.- Continental Illinois Bank and Trust Company.” Shields, the messenger of plaintiff bank, obtained the registered letter at the post office at Taylorsville and delivered it to Reid at the bank, who then drew a draft of plaintiff bank on its correspondent, National Bank of Kentucky, at Louisville, in favor of Continental bank for $4,004.27. This draft was signed by Reid as cashier of plaintiff bank. He then attached the draft to one of the duplicate collection letters that had been received from the Chicago bank, placed them in an envelope of plaintiff bank, addressed to Continental bank, and put the same in the outgoing mail box of the bank, and then Shields, in the course of his duties, carried the letter to the post office and mailed it. Prior to the purchase of the Sinclair stock Reid had bought securities through defendants “as many as eight or ten times over a period of three or four months,” and in each of the transactions the same procedure that we have stated was followed, and in each transaction Reid made payment to plaintiff bank for the amount of the draft of that bank used, but on the occasion in question, while he retained the stock certificate, he failed to make payment to plaintiff bank, left Taylorsville, taking with him the last draft, and a few days later he returned it to plaintiff bank by mail, with the following written by him upon' its face, ‘ This is the amount I am short.” The Fidelity & Deposit Company of Maryland had issued a surety bond to plaintiff bank conditioned for the faithful performance by Reid of his duties as cashier, and the bank presented its claim to the surety company for the amount of the default and that company reimbursed the bank in full for its loss and took an assignment of the claim. Later a petition in bankruptcy was filed against Reid and in the proceedings the surety company received $1,19498 on its claim, and the court, in assessing the damages in the instant suit, deducted that amount.

The officers of plaintiff bank were E. D. Bourne, president; L. W. Ross, vice president; Edwin A. Reid, cashier, and B. O. Wigginton, assistant cashier. E. D. Bourne organized the bank in 1882 and for many years was active in the management of the same, but at the time in question, while he was at the bank daily, “he did not attempt to do any book work,” but when Reid and the assistant cashier were both out he would handle the securities that came to the bank with drafts for collection, and occasionally he signed bank drafts. While Ross had been counsel for the bank and a member of its board of directors for 30 years, he does not seem to have taken an active part in its management. Wigginton, assistant cashier, had authority to sign bank drafts and cashier’s checks. “Either Mr. Reid or the assistant cashier (Wigginton) handled the securities that came to the bank with drafts for collection.” As to certain employees of plaintiff bank mentioned in the evidence: Leo Shields was a bookkeeper, and also a messenger to take the bank’s outgoing mail to the post office and to receive the bank’s incoming mail and deliver the same to the bank. Pearl Simpson appears to have been a general assistant. Reid “had the general management of the affairs of the bank.” He had been connected with it for 19 years, first as bookkeeper, and for the five or six years just prior to 1929, as cashier. ‘ ‘ There had never been any irregularity or difficulty as to his services. He enjoyed the absolute confidence of the board of directors.” “Where securities came to the bank by registered mail with drafts attached for collection Mr. Reid was the one who had charge of the handling of those securities and the collection of the drafts.” Shields brought the bank’s mail, including registered letters, to the bank, and it was his custom to deliver all of the registered mail to Reid. When remittances were to be made by the bank in payment of drafts that came to it for collection Reid would prepare most of them and would then put the letters containing the remittances in the bank mail box and Shields would take them to the post office. Ross testified that Reid had charge of making the collections of drafts drawn on the customers and of making the remittances in payment of the drafts. In the examination of Ross the following occurred: “Q. Was the purview of the duties of Mr. Reid as cashier of the bank, to buy a bank draft and send it out in payment of a draft drawn on him and sent to the Bank of Taylorsville for collection? A. He had the right to buy drafts in the bank the same as any other individual, but of course he would pay for the drafts bought by himself. Q. In case he did buy such a draft would it have been considered proper of him within the purview of his duties to send it in payment of a draft drawn on him? A. Yes, sir. Q. If you, Mr. Boss, as director of the bank, and Vice-President and counsel, had been asked at any time in April 1929, whether or not it was proper for Mr. Beid himself to buy a bank draft on the Bank of Taylorsville, and remit it in payment of a draft drawn on him, what would you have said? A. I would have said he would be permitted to do so. Q. There was nothing irregular in Mr. Beid buying a bank draft and sending it out in payment of a draft drawn on him, even though he signed it himself? A. Nothing whatever. . . . Q. Mr. Boss, had you any information before April 24, 1929, of Mr. Beid buying any stock through any brokerage house ? A. Yes, I knew Mr. Beid had been buying some stock previous to that but I was under the impression that Mr. Beid was paying for all the stock he was buying, cash. Q. Had Mr. Beid, prior to April 24, 1929, paid for any stock that he was buying by drawing a cashier’s check on your bank and without paying for the cashier’s check? A. Not to my knowledge. Q. Had Mr. Beid, in April, 1929, any authority of any kind to draw a cashier’s check on the Bank of Taylorsville on its funds in the National Bank of Kentucky, to pay for stock without paying for the cashier’s check? A. No, sir. . . . Q. As a matter of fact, all the time during these eight years that Mr. Beid was acting as cashier of the Bank of Taylorsville, he had the general management of the affairs of this bank? A. He did. Q. That included the signing of the cashier’s checks.and bank drafts? A. It did.” Mr. Bourne testified as follows: “In April, 1929 he (Beid) had practically charge of the bank. ... He had the management of the bank’s business. Either he or the assistant cashier signed each of the bank drafts of the Bank of Taylorsville. Occasionally I signed them. Both the cashier and assistant cashier had authority to sign bank drafts. These were usually drawn on our correspondent bank in Louisville or our correspondent in New York. At the time referred to almost all of the mail of the bank went through Reid’s hands. Sometimes he brought it to the bank, sometimes Mr. Wigginton did, and sometimes one of the bookkeepers. Either Mr. Reid or the assistant cashier handled the securities that came- to the bank with drafts for collection. Very often if they were both out I would handle them. They would carry each of the transactions of that kind through one of our correspondent banks either at Louisville or New York.” Mr. Bourne sometimes made purchases of securities, and in each instance the securities would come to the bank by registered mail with a draft drawn on him and he would then issue a bank draft on plaintiff bank, signed by him as president, for which he would reimburse the bank. “That was the usual procedure.”

Defendants contend that they “through their agent, the Continental Illinois Bank and Trust Company, forwarded the draft drawn by the defendants on Reid, to the plaintiff Bank of Taylorsville for collection.” The undisputed facts sustain this contention.

Defendants next contend that “the draft drawn by the defendants on Reid and forwarded to the plaintiff Bank of Taylorsville for collection was in fact duly received by that bank in the usual course of its business.” Plaintiff answers that Continental bank nominated plaintiff bank as an agent to collect, but that in order to create the relation of principal and agent it was necessary for plaintiff bank to accept the agency or to act thereunder; that “if there was nothing in the evidence other than the fact that the draft for collection, together with the oil stock and the letter requesting the collection, was put in an envelope addressed to Bank of Taylorsville and deposited in the mail, then from this alone it might be presumed Bank of Taylorsville as a corporation received that envelope and its contents” and acted thereunder, but that the evidence shows that Reid was the only one connected with the bank that knew about the transaction. Plaintiff calls attention to evidence, adduced upon the hearing, that shows that Reid had the general management -of the affairs of the bank and that he almost always handled the registered mail, and it argues therefrom that defendants, at the time of the transaction, “might well have known that in a small bank the unfaithful agent, that- was particularly interested in the transaction, would be able to hide the transaction completely from his principal.” We find no evidence that defendants or their agent knew or had any reason to believe that Reid had the general management of the affairs of the bank and would be the sole person connected with the bank who would know about the transaction, or that defendants or their agent had any knowledge as to the manner in which the business of plaintiff bank was conducted, or that “almost all of the bank’s mail went through Reid’s hands.” There is no evidence from which it could be reasonably inferred that when Continental bank sent the letter in question “addressed in an envelope to the Bank of Taylorsville,” it knew or should have known that the letter would be received by Reid and the transaction hidden from the other officers of the bank. Continental bank followed the customary procedure in matters of this kind. When Shields received the registered letter at the post office he was acting as the agent of plaintiff bank, and his possession was the possession of the bank. He delivered the letter to Reid, who was the duly authorized officer of plaintiff bank to receive it. The instant contention of defendants must be sustained.

Defendants contend that “the bank draft of the Bank of Taylorsville received by the Continental Bank in payment of the draft drawn on Beid and sent to the Bank of Taylorsville for collection was returned by the Bank of Taylorsville in due course of business and was the duly authorized remittance of the plaintiff bank.” We deem it necessary to refer to the principal cases cited by plaintiff and defendants in connection with the instant contention: Paine v. Sheridan Trust v. Sav. Bank, 255 Ill. App. 250, decided by this division of the court, and affirmed by the Supreme Court (342 Ill. 342), cited by plaintiff, is, we think, clearly distinguishable from the instant case upon the facts. In our opinion therein we said: “Plaintiffs, copartners as Paine, Webber & Co., were engaged in a stock brokerage business in Chicago and elsewhere. Defendant was a corporation, doing a general banking business in Chicago. During May, 1927, and prior thereto, plaintiffs were acting as brokers for defendant and its customers in the buying and selling of securities.. On May 11, 1927, and for several years prior thereto, plaintiffs had in their employ as cashiers in their Chicago office C. E. Carlson and J. J. Collum, who were known by defendant to be such. In December,. 1926, Carlson, at the request of Collum, borrowed from defendant $5,500, giving his (Carlson’s) note therefor, secured by the deposit with defendant of 600 shares of the preferred stock of the Julian Petroleum Corporation. Carlson borrowed said sum for the accommodation of Collum, and the stock, so deposited as security, .was the property of Collum. About the same time Collum, who personally had a checking account with defendant, borrowed a like sum from defendant, pledging as security for his note an additional 600 shares of said stock. From time to time thereafter Collum made payments on both notes to defendant, usually in cash but on one or two occasions by his personal check. On May 10, 1927, there was due to defendant on each note a balance of $1,650, and the market value of the collateral thereto had so rapidly declined that defendant determined to call the loans. On that day Joseph H. Hartman, a note teller for defendant, notified Collum (but not Carlson) by telephone that the balance due on both notes, $3,300, together with accrued interest of $3.85, must be paid at once. During this telephone conversation Collum said to Hartman that if defendant would deliver the two notes, and the stock deposited as collateral, to the 'cashier’s cage’ in plaintiffs’ Chicago office, he (Collum) would give defendant a check for the amount due on the notes. On the following morning, May 11, Hartman gave to a messenger of defendant the two notes, and the 1,200 shares of said stock, with instructions to deliver them to Collum at plaintiffs’ office upon receipt of a check for $3,303.85. Later in the day the messenger returned with the check in question, which defendant accepted and applied the proceeds to the payment of the balance due on the two notes. The check is drawn by plaintiffs, viz., 'Paine, Webber & Co.,’ by 'Walter Brunton’ and 'C. E. Carlson. ’ It is dated May 11, 1927, and it directs the drawee, the Standard Trust and Savings Bank of Chicago, to ‘pay to the order of Sheridan Trust and Savings Bank’ (defendant) the sum of $3,303.85. . . . Neither when defendant accepted the check, nor before it received the proceeds thereof, did it make any inquiry as to Collum’s authority to use a check of plaintiffs to pay his personal indebtedness. On May 11, plaintiffs did not owe defendant $3,303.85, but they did owe it the sum of $1,058.97, which sum they paid on the same day by another check, also accepted by defendant. We find no evidence in the record tending to show that Collum had authority to use plaintiffs’ funds to pay his personal indebtedness, or that plaintiffs ever said or did anything which could have led defendant to believe that Collum had any such authority. The evidence discloses that Carlson and Collum each had authority to draft and sign checks in payment of plaintiff s\ obligations. Such checks, however, were required to be signed also by either M. J. O’Brien (a resident copartner of plaintiffs’ firm) or Walter Brunton (plaintiffs’ office manager.) The evidence further discloses that Collum drafted the check in question, that he entered in the check register a false statement that the check was issued ‘in payment of 100 shares of Warner A’ stock, that he obtained the signatures of Carlson and Brunton on the check by misrepresentations, and that as cashier he drew many of plaintiffs’ checks each day. . . . The check, drawn by plaintiffs, was payable to the order of the bank, to which plaintiffs were not then indebted to the amount of the check. And the check was delivered to the bank by Collum, known by the bank to be an agent and cashier of plaintiffs ’ with limited authority, in payment of his personal indebtedness to the bank, and was accepted by the bank in discharge thereof.” In the present case defendants, through their agent, Continental bank, did not deal with Reid and did not receive payment of the draft from him, but sent a draft to plaintiff bank with directions to collect it of Reid, and it thereafter received from plaintiff bank the draft in question; and, furthermore, it is admitted that Reid had not only general authority in the ordinary course of business to draw cashier’s checks of plaintiff bank on its funds in the National Bank of Kentucky, but that he also had authority to pay for the stock purchased by him in like manner, provided he reimbursed the plaintiff bank for the cashier’s checks.

Plaintiff argues that it is a banking institution and cannot legally, under its charter powers, allow its money to be used in payment of an individual debt, and that even if its directors had authorized the transaction in question such action would have been ultra vires and would not bind plaintiff bank, and in support of this argument cites St. Charles Sav. Bank v. Orthwein Inv. Co., 160. Mo. App. 369, 140 S. W. 921. It is somewhat difficult to reconcile this argument with another raised by it, viz., “The authority and right of Reid to take his principal’s draft and money, without paying therefor, must be shown by previous transactions of the same kind; and must have been known by defendant or its agent when taking Reid’s cashier’s check in question.” However, St. Charles Sav. Bank v. Orthwein Inv. Co., supra, is readily distinguishable from the instant case upon the facts. It there appears that the defendant was doing a brokerage business in St. Louis, and Mispagel, the cashier of the plaintiff bank, “had a great many transactions with the defendant of a speculative nature, dealing in ‘puts and calls,’ buying and selling wheat, stocks, etc.,” and in each Mispagel issued and personally delivered to defendant a draft signed by him as cashier of the plaintiff bank, in favor of the defendant payee, and defendant admitted that it had knowledge that Mispagel was using his authority as cashier to sign bank drafts “on his own account,” and the defense it sought to interpose was that “plaintiff was well aware of each transaction, or by mere inspection of its books could have so become, by the exercise of ordinary care, and authorized, sanctioned, and ratified such acts.” This was an extreme case, entirely different from the instant one upon the facts, and the Missouri court held that in equity and good conscience “in view of the special facts of the case, the defendant was not entitled to retain the money as against the plaintiff.” The court held that the drafts were presumptively void “and the obtention by the defendant of the money on them presumptively illegal,” and that “no implied authority in the cashier to issue drafts for his own benefit could arise from the general course of business in the bank . . . nor by their having sanctioned the issuance by him of other drafts than those in question,” and the court also uses certain other language in reference to implied authority and ratification that seems to run counter to the weight of authority. In Goshen Nat. Bank v. State, 141 N. Y. 379, 36 N. E. 316 (opinion by Peckham, J.), wherein it appears that the cashier had fraudulently drawn a draft in favor of the State for taxes received by such cashier as tax collector and had personally forwarded the draft, the court said: “It was also proved on the .trial that the cashier had the custody and possession of the blank drafts for the claimant, and that he had the right to sign drafts drawn by the claimant on its corresponding banks, and that he had the right to draw a draft on the corresponding bank of the claimant for himself upon the same terms that he had to draw a draft for a stranger.” The court further said (p. 318): “It also appears that he had the right to draw such draft for himself upon the same terms that he would have had in case of a third party, which means, I assume, upon payment to the bank of the amount of the draft. There was an apparent authority to draw the draft. It appeared to have been drawn in the course of the employment of the cashier, and it was an act which was within the scope of his general powers. We do not think that, in the case of a bank draft so drawn, the party receiving it would be charged with the duty of inquiry, or with notice of the fact that the cashier had not paid for the draft, and that he was therefore using the funds of the bank to pay his private debt. He would only be so using them in case he did not pay for the draft, and its form might he the same even if he had paid for it in full. We think there is nothing unusual or suspicious in this form of making the draft payable directly to the creditor of the cashier, nor any notice that in so doing the bank’s funds have been improperly used. Bank or cashier’s drafts are used so enormously at the present time in the payment or settlement of debts, and in other commercial transactions, that they have almost acquired the characteristics of money. So long as they are drawn on behalf of a solvent bank, and upon a solvent drawee, and signed by one of the officers usually signing such instruments, they are regarded by the commercial community very much the same as so much cash; and the fact that the draft was drawn by a cashier directly in favor of his own creditor, and sent to that creditor by him, would not naturally give rise even to the suspicion that there was anything irregular, fraudulent, or wrong in the conduct of the cashier. The presumption would be that he had performed his duty, and paid for the draft, and that it, therefore, was his property.” The court held that the bank could not compel the refunding of the proceeds of the draft if the State had no knowledge of the fraud. This case was later quoted by the same court with apparent approval in Hathaway v. Delaware County, 185 N. Y. 368, 78 N. E. 153, 154-5. It will be noted that in the Goshen case the cashier personally forwarded the draft in question to the defendant. (See also Martin v. Webb, 110 U. S. 7; Pemiscot County Bank v. Central-State Nat. Bank, 132 Tenn. 152, 177 S. W. 74; Pemiscot County Bank v. Central-State Nat. Bank, 135 Tenn. 13, 185 S. W. 702, cited by defendant.) In Campbell v. Manufacturers’ Nat. Bank, 67 N. J. L. 301, 51 Atl. 497, the court, in passing upon a somewhat similar state of facts to that present in St. Charles Saw. Bank v. Orthwein Inv. Co., supra, said (p. 499): “If a bank gives its cashier authority to draw drafts for his own account on its funds, or ratifies his acts in known transactions which he openly conducts, honestly or dishonestly, it will not be permitted to say that a similar transaction which he secretly and by concealment conducts does not bind it,” but the court further held that as the proof showed that the transaction was known to be an individual one and not with the bank, the burden was cast upon the claimant to establish that the act of the cashier done for his own individual benefit was authorized or ratified, and that neither authorization nor ratification could arise from an unknown,- concealed, fraudulent transaction of a cashier. Plaintiff cites Merchants’ Nat. Bank v. Nichols & Shepard Co., 223 Ill. 41, but we are unable to see how that case has any application to the facts of the instant one. There the court held that the fact that a corporation carries on the sale of its products through the medium of agencies distributed over the country is not ground for the assumption that the agents, for making, the sales and collecting the proceeds, are clothed with the power to -borrow money, and also held that “a principal may be bound to the extent of the apparent authority which he has conferred upon his agent, but that is because he has held the agent out to the public as possessing* the power which the ag*ent exercises.” Nor do we think that Wheeler v. Home Savings and State Bank, 188 Ill. 34, also cited by plaintiff, is applicable to the facts of the instant case. In Mendel v. Boyd, 71 Neb. 657, cited by plaintiff, it appears that the cashier of a bank embezzled $18,000 of the funds of the bank. “A large portion of the funds thus embezzled were lost by the cashier in gambling on the board of trade, through the defendant who conducted a commission house.” The funds in question “were received by the defendant from the cashier in the gaming transactions.” (Italics ours.) It also appeared that the cashier issued the drafts in question without any authority, and the court held that he was guilty of conversion. In Home Sav. Bank v. Otterbach, 135 Iowa 157, 112 N. W. 769, also cited by plaintiff, the defendant dealt directly with the cashier of the plaintiff bank and there was no evidence of authority or apparent authority in the cashier to draw the draft in payment of his own debt. It must be noted that in each of the principal cases relied upon by plaintiff bank the defendant dealt directly with its debtor. In the instant case Reid paid for the plaintiff bank draft he used in each of the eight or ten prior transactions, and even if the Continental bank had made inquiry in reference to any of the said transactions, the answer would have been, according to the testimony of the officials of plaintiff bank, that Reid had authority to sign the draft.0 The officers and directors of plaintiff bank had absolute confidence in Reid and they placed in his hands the general conduct of the business of the bank, and in our judgment it would be highly inequitable, under the facts of this case, to make the defendants bear the loss sustained by plaintiff bank through the failure of Reid to pay for the draft in question. After giving very careful consideration to the important question involved in the instant contention of defendants, we have reached the conclusion that the contention must be sustained.

When the evidence was concluded in this case, the trial court found the issues for defendants and rendered, what seems to us, a clear and able opinion in support of his finding. But upon a further consideration of the case the court made a finding for plaintiff and based it upon the ground that defendants knew that Reid was speculating, and that a certain letter written by him to an employee of defendants was sufficient to warn the latter that Reid needed money very badly and therefore it was necessary that defendants should show affirmatively that somebody in the bank other than Reid had actual notice of what Reid was doing with the bank’s moneys “as far as this transaction was concerned.” The letter referred to by the court is as follows:

“Taylorsville, Ky. Nov. 17, 1928

“Dear Bob:— ,

“Just a line about Pacific Western stock try, to get me 25 shares at least please, and would like to have 50 — if possible to get it.

“Tell your people I have bought considerable bonds for the bank, and it will be a personal favor to throw something to me that I can make something on for myself, and I do need to make all I can.

“Thanking-you for anything you can do for me I am

“Tours truly

“Edw. A. Reid.”

In our judgment the evidence does not show that Reid was “gambling in stocks” or “speculating in stocks,” as these terms are ordinarily used and understood by laymen and courts. He purchased securities, paid for them and received delivery of the certificates of stock. So far as this record shows he retained all of the stocks that he purchased. St. Charles Sav. Bank v. Orthwein Inv. Co., supra, and Mendel v. Boyd, supra, are cases involving’ transactions of a purely speculative or gambling nature. In our judgment, to hold that under the circumstances of this case the Continental bank was bound to make inquiry of plaintiff bank before it had the legal right to accept the draft in question, would place an intolerable burden upon banks. Nor can we agree with the interpretation placed upon Reid’s letter by the court. As we read it, it furnishes no reasonable basis for a suspicion that Reid was doing or might do something illegal or improper in the performance of his duties as cashier.

The parties submitted certain findings of fact, and ■defendants have assigned as error the action of the trial court in relation to several of the same, and as we find the facts different from the findings of the trial court, we therefore make a finding of facts.

The judgment of the superior court of Cook county is reversed, with a finding of facts, and judgment will be entered in this court for the defendants.

Reversed with a finding of facts and judgment here.

Keener, P. J., and G-ridley, J.,

concur.

On motion of defendants, Charles R. Blyth et al., copartners doing business as Blyth & Co., to modify the judgment order of December 30, 1932, by making additional findings of fact, it is hereby ordered that said motion is allowed and said finding of facts is modified so as to read as follows:

Finding of facts: We find as facts that the defendants, through their agent, forwarded the draft drawn on Reid to the plaintiff Bank of Taylorsville for collection ; that said draft was duly received by that bank in the usual course of its business; that the bank draft of the plaintiff bank, sent to the defendants’ agent in payment of the draft sent by such agent to the plaintiff bank for collection, was the remittance of the plaintiff bank; that when such remittance was received by the defendants’ agent it had no knowledge of any facts which could reasonably constitute notice to it that there was anything irregular or improper in the handling of the transaction by the plaintiff bank or any of its officers or employees; that Reid had the authority, in the usual course of the business of the plaintiff Bank of Taylorsville, to buy bank drafts of the plaintiff the same as any other individual and to sign such drafts as cashier and use them in taking up drafts drawn on him; that during a period of three or four months prior to the transaction involved in this case, Reid had bought securities from the defendants, eight or ten times, and in each of those transactions the payment for the securities was made in the same manner as in the transaction involved in this case; that the defendants are not justly indebted to the plaintiff in the amount alleged in the declaration nor any part of it.


author: Mr. Justice Scanlan Kerner, P. J., and Gridley, J.,

text:
    In re Estate of Daniel M. Jackson, Deceased. Claim of William E. Harper and Clara G. Harper, Appellants, v. Charles S. Jackson, Executor of the Estate of Daniel M. Jackson, Deceased, Appellee.
    Gen. No. 36,061.

      Opinion filed December 30, 1932.
    James D. Murphy, for appellants; Frank F. Trunk, of counsel.'
    Adolph Marks, for appellee.
   Mr. Justice Scanlan

delivered the opinion of the court.

William E. Harper and Clara G. Harper filed a claim against the estate of Daniel M. Jackson, deceased, in the probate court of Cook county. The claim was allowed “for the sum of $9397.50 less rebate for $540.46 class No. 6.” An appeal was taken to the circuit court, where the cause was tried de novo by the court, without a jury, and there was a finding and judgment for the claimants for $1,396.37. The claimants have appealed.

' Claimants owned the nine-room, three-story residence,'at 3441 Michigan'avenue, Chicago, and entered into a written lease with Emanuel Jackson Undertaking Corp., Daniel M. Jackson, Pres., for a 10-year term commencing May 1, 1924, at a monthly rental of $150. Daniel M. Jackson guaranteed the payment of the rent and the performance of the covenants of the lease. In the printed portion of the lease is' a provision that the lessee would “not permit said premises, to be used for any unlawful purpose,” and in the typewritten, portion a provision that the premises are “to be occupied for general undertaking business or any legitimate business.” Jackson died May 17, 1929. Bent was paid until October, 1929. The claim is as follows:

“Chicago, November 21st, 1929.

Due from

Estate of Daniel M. Jackson

To William E. Harper and Clara G. Harper

Re: 3441 Michigan Avenue.

October rent, 150.00

November rent, 150.00

Bent for balance term of lease to April 30th, 1934 7950.00'

Fire Insurance on $15,000.00 to April 30th, 1934 247.50

General Taxes 1928-1929-1930-1931-1932-1933 @ $300.00 a year 1800.00

1934^January to April inclusive 100.00

Total 10397.50

Less Guarantee Paid 1000.00

9397.50”

The estate contends that the lease was entered into by the lessors with knowledge that the premises were to be used as a gambling house, and they knew, after Jackson took possession under the lease, that the premises were being used for gambling purposes and permitted such use, and that therefore the lease was void and could not be made the basis of a claim for rentals. The claimants contend: “The lease was entered into in good faith by the lessors. The premises were illegally used without knowledge of such use by the lessors”; that even if they learned, after Jackson took possession, that he was conducting a gambling-house in the premises, nevertheless, the claimants would have no right to consider the lease at an end and to take steps to oust Jackson until the latter had been arrested and convicted of keeping a common gambling house.

The undisputed evidence shows that from 1910 until his death Jackson conducted gambling houses on the south side of Chicago. Not only many officers and members of the Chicago police force, but thousands of people in the vicinity of the premises knew of Jackson’s connection with gambling houses. Claimants state in their brief that Jackson entered into possession of the premises and had them “fixed up as a gambling house, and then conducted a lieutenant of police through the house before it began to operate as such. It is apparent that the police were not strangers to the fact that Dan Jackson, who was ward committeeman and later a member of the Illinois Utilities Commission, and undertaker, and politician conducted a gambling house upon the premises at 3441 Michigan avenue. In the trial of the case one captain of police, four lieutenants of police, seven officers of the City of Chicago, and one South Park policeman testified for the appellees that gambling paraphernalia and fixtures were in the place; that men were found- therein with scratch sheets, and names of horses, jockeys, etc.-, were upon the walls. Employees, patrons and police have come into court to testify for the estate that said premises were used in conducting a gambling house therein from 1924 to October 5, 1929, when the place was raided, the fixtures destroyed and the premises abandoned. The police made two raids of the gambling house and placed men under arrest once in later part of 1926 and again on October 5, 1929. The men arrested were discharged and no conviction was had of anyone for a violation of law upon the premises during the entire period that the premises were so occupied. . . .No police officer ever did anything to suppress the nuisance or report the fact that the house was fitted as a gambling house to the lessors. . . . It developed on the trial . . . that Jackson conducted a gambling house therein during his lifetime, which gambling house continued to operate after his death in June (May) 1929 until the place was raided by the police on October 5, 1929, whereupon the premises were abandoned in a bad state of repair and uninhabitable. . . . Here in the case at bar we have the sad spectacle of officers of the police of Chicago whose aggregate testimony shows that they knew of the existence of gambling upon the premises from 1924 to 1929, and yet were so impotent or neglectful, to put a kind construction upon their acts, that in all these years they could not go lawfully about simple police duties, secure a search warrant and lawfully conduct such search, arrest violators of the law and seize and destroy gambling apparatus there, but on the contrary they blunder up to a house" with force and display of arms, arrest 11 or 13 patrol loads of men, never arrest the notorious (so they say) gambler, Dan Jackson, owner and keeper, and on the morrow the counsel for the prisoners makes a motion in court to suppress evidence, because it was secured by an unlawful search of the police without a search warrant. There was, of course, .no conviction of inmates or keeper.” The claimants, in their brief, further state that “the evidence is conclusive that he (Jackson) was the principal, and obtained possession of the premises finder a lease made to the Emanuel Jackson Undertaking Corporation with the purpose and intent that he, Daniel M. Jackson, should conduct therein a gambling house.” It is undisputed that Jackson “had strong political affiliations and ran political clubs in the ward.” As soon as he took possession of the premises the entire place was furnished with all of the paraphernalia of a general gambling house and race track gambling establishment. In June, 1924, Jackson took a lieutenant of police through the building, and the latter, a friend of Jackson, testified that he then found the place equipped as a gambling house; “he showed me the layout in June, 1924. There wasn’t any gambling when I was there. He showed me how the place was fitted up. ... I never caused his arrest.” It is not disputed that Jackson never conducted an undertaking business in the premises and that there was nothing on the inside or outside of the place that would even suggest that such business was conducted therein. “There were two sets of doors” in connection with the front entrance. The second or inner one was “an iron door.” In each door there was an opening or “peek hole.” Between the two doors was a vestibule. Albert Warren, who was doorman from the time the place was opened until it closed in 1929, testified that when the outside bell rang he would look out through an opening in the outer door and if the person or persons on the outside were all right, “if they were not policemen,” he would admit them to the vestibule and there search them and take away any weapons they might have, which would be restored to them when they left the premises; that as' soon as he had completed the search he would notify “the lookout” behind the iron door that the party or parties were “all right” and the lookout, who also had a peekhole through which he could observe what was taking place in the vestibule, would then open the iron door and admit the party or parties to the gambling house; that he admitted, on an average, 200 or 300 persons a day; that as soon as a person passed the iron door he could “see the gambling going on.” A woman who lived a few doors from the place testified that all day long you could see people going in and out of the place, and that she had seen as many as ten or twelve men go in at one time; that “every few minutes, or five or ten minutes you would see them come in and going out. . . . That was during 1924, ’25 and ’26. . . .1 think ’27 too, well, all the time until they raided the club and closed it,” in 1929; that she had seen the “police go in, lots of times . .' . but they didn’t make any efforts to pull the place, as they call it”; that she “saw police patrols there on different occasions. . . . One date I saw a police patrol, two or three of them coming there constantly until I counted eleven or thirteen of them, I am not sure which, . . . and they took axes and cut their way in the back of the place, and then we went in the front to watch the policemen take the people out, and they took eleven or thirteen loads, I don’t remember which”; that she had seen the police wagons there several other times; that she had seen police go in the place “any number of times.” A number of police officers testified that they went to the place at different times but did not “pull it,” because after they gained admittance they did not find anyone actually gambling*. Notwithstanding that complaints were made to the police stations as to the nature of the business conducted in the premises, and that many members of the police department knew the character of the place, it appears that during the lifetime of Jackson inmates' of the place were arrested but once, although the undisputed evidence shows that it was a matter of common knowledge in the vicinity of the premises that they were used as a gambling house, where hundreds of patrons went daily to bet on horse races and to play games of chance for money. The one occasion referred to was in 1926, when the police raided the place and arrested 35 men and took them to the police station, and although Jackson unlocked the front door and admitted the police to the premises and gave every indication that he was running the place, he was not arrested. The men arrested were discharged. In 1929, after the death of Jackson, the police again raided the place. They gained admittance to the vestibule between the outer door and the iron door and then announced themselves as police officers and ordered the iron door to be opened. The lookout man behind that door knew the officer in command and refused to open it. The police then broke down the iron door and found inside 75 or 100 men trying to escape through windows and doors. The officer in command testified that he made no arrests on this occasion. There was another raid in October, 1929, when the police broke down the front door and the iron one, with axes, and arrested from 150 to 170 people who were gambling, and it required 12 or 15 patrol wagons to take the prisoners to the police station.

As the claimants now admit that Jackson conducted a gambling house in the premises from June, 1924, until his death, we have made the aforesaid somewhat lengthy statement as to the character of the place and the happenings there because it bears upon the question as to the good faith of the claimants when they made the lease and their knowledge of the use made by Jackson of the premises. The claimants required Jackson to guarantee the payment of the rent and also the performance of the covenants of the lease, and they state that he was “the owner and keeper” of the place. The proof is overwhelming that he was well known in the vicinity as a professional gambler and the operator of gambling resorts, and it must be presumed that the claimants made some inquiries as to the guarantor before they signed a lease for a term of 10 years. They also owned other pieces of property in the neighborhood and their real estate agents had an office but a very short distance from 3441. Harper testified that these agents collected the rents and looked after the insurance, and “the fulfilling of the lease” in question; that he (Harper) transacted his banking business with the Franklin bank, located on the corner of Michigan avenue and 35th street, but a few feet south of 3441; that his business with the bank took him there “every week or it might be twice a week. It might be only once in two weeks . . . anywhere from three to half a dozen times a month ’ ’; that when he was in the neighborhood of 3441 he “would walk around and just kind of look things over, but I wouldn’t go and request to go in”; that the place “did not look like an undertaking establishment”; that there was a brass sign on the right hand side of the door with the words “Dunbar Club” on it; that “Daniel Jackson or the funeral company or the occupants, called up and told me they had accidentally opened one or two of the letters (addressed to Harper) by mistake”; that upon three occasions he rang the front door bell and was admitted to the vestibule by a colored man and that on each occasion he told the man that he was William E. Harper, the landlord, qnd that he had been told that there were some letters for him that had been directed to that address; that the doorman .did not admit him through the second door, and he “was not allowed to see the interior”; that the doorman would bring back the letters and deliver them to him in the vestibule; that he never at any time made any effort to go inside the premises or to ascertain what business was being conducted therein. “Q. Weren’t you interested in knowing what they were going to use it for? A., No, sir, the lease had been signed and I didn’t feel I was concerned anymore, because sooner or later, whether important or not, that was the purpose for which it would be used. I had absolute faith in them. . . . Q. Did you ever make any inquiry as to what they were running in there? A. No, sir. Q. Were you interested in it? A. No, I depended upon the wrongdoing to be reported to me. Q. By whom? A. By anybody; the real estate agent or any other person.” The witness further testified that he did not ask to go inside because he thought that if he was welcome they would invite him in; that prior to October, 1929, his attention was never called to the fact that there was reputed to be gambling at 3441 Michigan avenue, and that he never heard a complaint from any source that gambling was conducted in the place. “Q. Prior to October of 1929 did you ever have your attention called to the fact that there was reputed to be gambling at 3441? A. No, I had no direct knowledge of that”; that after he heard of the raid in October, 1929, he went to his real estate agent and told him if those arrested in the raid were convicted in court, he “wanted immediate steps taken for their vacating the property, to stop the gambling,” and that he ascertained later that they were not convicted. There was a provision in the lease that gave him the right to have free access to the premises, “for the purpose of examining or exhibiting the same, or to make any needful repairs or alterations of said premises which said first party may see fit to make,” but he testified that from the time that Jackson took possession until months after the death of the latter he never saw the inside of the premises, nor did he at any time make any inquiry of anybody, as to what business was being conducted therein. After the death of Jackson he received rent from somebody until October, 1929. Gambling continued in the premises until October, when the police not only raided the place but appear to have gutted it. Jackson was dead. Gambling ceased and the place was abandoned. The payment of rent also ceased, and then, for the first time, Harper, according to his testimony, visited the place. Warren, the doorman, testified that on two occasions, possibly three, Harper came to the door of the place and that as the latter was a white man he could not admit him without the O. K. of Jackson; that he notified the man on the inside that Harper wished to see Jackson and the latter ordered Warren to admit Harper to the place and that Harper then went through the iron door into the gambling house, and the witness saw him meet Jackson; that gambling was going on during Harper’s visits. Harper, in rebuttal, testified that the doorman would not let him go beyond the vestibule. A witness who conducted a store a few doors from the place testified that he had known Harper for a number of years and that the latter frequently came to the store to buy cigars and fruit; that the Harper family dealt with him before they moved from 3441; that in 1925 and 1926 he told Harper, on two or three different occasions, that they were “running a big gambling joint” in 3441, and that raids had been made on the place; that upon each occasion Harper “didn’t say a word, he kept quiet and looked out.” Harper did not specifically contradict this testimony of the storekeeper. It appears that before an application for a license to conduct an undertaking establishment on a boulevard is granted there must be filed with the city a written consent of a majority of the property owners on both sides of the boulevard in the block in which such place of business is to be located, and it was proven that no such frontage consent was ever filed with the City of Chicago, that no application for a license to conduct an undertaking establishment at 3441 was ever filed with the city, and that no license to conduct such a business at 3441 was ever issued. Harper testified that he never gave Jackson a written “frontage consent” for an undertaking establishment in the premises, and that Jackson never asked him for such consent. During all of the period in question Emanuel Jackson Undertaking Corporation continued to conduct its business at 3400 Michigan avenue, which is only 200 feet from 3441. The lease provided that the lessee “will make, at his own cost and expense, all repairs of every kind, nature and description, both inside and outside of the buildings on the premises herein described, including plumbing, heating, decorating, roofing . . . ,” and as soon as Jackson took possession of the building he made many very material changes in the interior of the same; but Harper, in spite of the fact that the tenant would not permit him to enter the premises and he could not tell from outside observation what was going on in the place, if his testimony is to be believed, never saw or requested to see the interior of the building.

When premises are rented by the lessee for gambling purposes, and this is known to the lessor, there can be no recovery for rent. (Harris v. McDonald, 79 Ill. App. 638 (affirmed, 194 Ill. 75), and cases cited therein; Fields v. Brown, 188 Ill. 111; White v. Holden, 206 Ill. App. 567.) Neither can he in such case recover against the guarantor. It is sufficient to say as to several cases cited by the claimants, that they merely hold that the proof must show that the landlord knew about the improper use of the premises, or that he knew when he executed the lease that the premises were to be used for gambling purposes.

The claimants argue that the lease specifically provides that the premises shall not be used for any illegal purpose, and that there is no evidence that the claimants and Jackson had any understanding that the premises were to be used for gambling purposes. An illegal agreement may be tacit as well as express, and its existence may be established by proof of facts and circumstances showing coincidences which can be accounted for upon no other assumption than that such an original understanding existed. (Estate of Ramsay v. Whitbeck, 183 Ill. 550.) In that case the court said (p. 562) : “It is not necessary that the understanding should be established by something that was said, but it may be arrived at from all the circumstances, in the lig’ht of experience and common observation. ” In the instant case, not only the printed part of the lease, but the typewritten part thereof provided that the premises should be used for only lawful purposes. This circumstance is not without some weight as tending to prove that the claimants intended to provide themselves in advance with a means of escape should the charge be brought against them that they rented the premises for a gambling house. (People v. Viskniskki, 255 Ill. 384, 388.) It has been held that in an action for rent, evidence of the reputation of a house as one of ill fame is admissible on the part of defendant to show that it was so used with the owner’s knowledge, and that the contract was illegal. (See Demartini v. Anderson, 127 Cal. 33, 59 Pac. 207, wherein many cases are cited in support of the holding. See also Graeter v. State, 105 Ind. 271.) It is, of course, the law that the intent with which the lease was made, or knowledge that the place was being conducted as a gambling house, may be shown by direct and circumstantial evidence. It would be contrary to human experience and common knowledge to hold that the events that we have recited could have happened without the consent and knowledge of the claimants. After a careful consideration of all the facts and circumstances we have reached the conclusion that the premises were rented by the claimants for gambling purposes and that they knew during the entire period that the lessees occupied the premises that they were being used for gambling purposes. Under such a state of facts the claimants cannot recover under the lease.

The judgment of the circuit court of Cook county is reversed with a finding of facts, and judgment will be entered in this court for the estate for costs.

Reversed with a finding of facts and judgment here.

Kerner, P. J., and Gridley, J.,

concur.

Finding of facts: We find as ultimate facts that the estate of Daniel M. Jackson, deceased, is not indebted to the claimants in the amount alleged in the claim nor any part thereof; and we further find that the claimants leased the premises in question for gambling purposes and that they knew during the entire period that the lessees occupied the premises that they were being used for gambling purposes.


author: Mr. Justice O’Connor

text:
    Russell Firebaugh, Appellant, v. Ellen Seegren et al., Appellees.
    Gen. No. 36,472.

      Hatchett, J., dissenting.
    Opinion filed January 6, 1933.
    Rehearing denied January 16, 1933.
    Arthur Abraham, for appellant.
    .Ernest A. Eklund and Frederick J. Bertram, for appellees.
   Mr. Justice O’Connor

delivered the opinion of the court.

By this appeal Bussell Firebaugh, trustee, seeks to reverse an order entered by the superior court of Cook county on October 11,1932, appointing a receiver in a foreclosure suit.

The record discloses that March 1, 1929, the defendants, Mr. and Mrs. Seegren and others, owned real estate in Chicago and on that date executed their bonds in the sum of $67,500 and to secure the payment of the bonds gave a trust deed on the property to Bussell Firebaugh, trustee. On or about September 2, 1930, Bussell Firebaugh, as trustee, took possession of the premises' — a 16-apartment building- — covered by the trust deed and proceeded to manage the property and collect the rents in accordance with the provisions of. the trust deed. A few days afterward Firebaugh filed his bill to foreclose the trust deed, and after a hearing a decree was entered and the Seegrens and others prosecuted an appeal to this court, where the decree was affirmed, 265 Ill. App. 381; certiorari was denied by the Supreme Court, 265 Ill. App. XIII.

In the bill of foreclosure the trustee prayed for the. appointment of a receiver. The decree authorized the trustee to continue in possession of the premises, collect the rents and manage the property as he saw fit, subject to the order and approval of the court, until the period of redemption expired.

October 10,1932, Mr. and Mrs. Seegren, part owners of the equity of redemption, filed their verified petition in the proceeding, by which they sought to have a receiver of the property appointed in lieu of Firebaugh. The substance of the allegations of the petition was that September 2, 1930, Firebaugh took possession of the premises under the trust deed and proceeded to take charge of the building and collect the rents; that in addition to the rentals he had received large sums of money from the owners of the equity of redemption in excess of $15,000 to apply on account of the indebtedness secured by the trust deed; and charging, upon information and belief, that Firebaugh had failed to account for the rents; that he was insolvent and had not efficiently managed the building, and that it was for the best interests of all parties that the property be taken from Firebaugh and placed in the hands of a receiver under the direction of the court.

On the same day Firebaugh filed his verified answer, in which he admitted that he had collected certain sums of money from the owners of the equity; alleged that on July 18,1931, the date on which the foreclosure decree was entered, he had accounted for all moneys received by him up to that date; denied he had converted any rents or other moneys to his use, and offered at any time, under the direction of the court, to make a full and complete accounting; denied that he was insolvent and had not efficiently managed the property.

It was also contended that Firebaugh had not advertised the property for sale as the decree provided, which he admitted had not been done because of his inability to secure sufficient bondholders to deposit their bonds with him so that he could bid in the property.

The matter came on for hearing before the chancellor rather informally and there was discussion between court and counsel. Statements were made by counsel, and from the hearing it appears that a solicitor for the owners of about 10 per cent of the bonds joined orally in the motion of the petitioners for the appointment of a receiver. It was denied that Firebaugh was insolvent. There was also discussion concerning a suit filed in the federal court involving the company that apparently purchased the bond issue involved in the foreclosure suit. It further appeared that no part of the taxes on the property for the years 1928, 1929, and 1930, had been paid, but that objections had been filed in the county court to these taxes. Firebaugh’s itemized statement, which was said by his counsel to show all the receipts and disbursements in connection with the operation :of the apartment building, was exhibited to the court and appears in the certificate of evidence. It was admitted that Firebaugh had in his possession $3,031.49 of the proceeds received- by him from the operation of the building.

The court said that since the trustee was not under bond, and since a charge as to Firebaugh’s insolvency had been made, and since there was some question raised in the case in the federal court which might involve the property under foreclosure, and since no part of the taxes had been paid, he was of the opinion it would be for the best interest of the bondholders and the owners of the equity that a receiver be appointed, over which the court would have direct control, and the order was accordingly entered. An order was also entered directing Firebaugh, as trustee, to turn over the money in his hands to the receiver. The receiver’s bond in the sum of $10,000 was filed and approved and the trustee prosecutes this interlocutory appeal.

A number of. legal propositions are advanced by the trustee as to why the order appointing the receiver is wrong and should be reversed, and among the cases cited in support of the contentions are Altschuler v. Sandelman, 264 Ill. App. 106; Consumers Bond & Mortgage Co. v. Sadin, 266 Ill. App. 141, and other cases. The holding in each of these cases is that where a receiver is appointed in a suit brought to foreclose a junior mortgage, the trustee of the prior mortgage, which is a first lien on the property, may intervene in the foreclosure suit and have the property turned over to him. But we think that question is not important here because we are of the opinion that under the pleadings' and the facts shown on the hearing, the court h'ad the right to appoint a receiver of the property. The bill prayed for the appointment of a receiver and the decree authorized the trustee to stay in possession of the premises subject to the further order of the court until the period of the equity of redemption expired.

Under the facts as we have above discussed them, which appeared on the hearing of the motion for the appointment of the receiver, we are unable to say that the action of the chancellor in appointing the receiver was unwarranted. As a general proposition, a receiver will be appointed by the court where it is for the best interest of all-parties, even when contrary to the provision of the contract. Frank v. Siegel, 263 Ill. App. 316.

A further complaint is made that the order entered was erroneous because there was no- hearing*, no witnesses sworn, and the trustee had by his verified answer denied the allegations of the petition. There might be some merit in this point if it had been urged on the hearing, but a reading of the entire proceeding before the chancellor discloses the fact that no objection was made that witnesses were not sworn and heard, or that the hearing was conducted informally. Matters of this kind, we know, are often brought up as motions of course. The trustee, not having made any objection to the manner in which the motion was heard, cannot urge such contention for the first time in a court of review.

A further point is made that the order appointing the receiver is fatally defective in that it does not affirmatively show that the court was of the opinion that the receiver should be appointed without requiring bond by the owners of the equity of redemption who made the motion. We think this contention is untenable. All of the facts are in the record and it is therefore not necessary that the specific finding* appear in the order. Central Trust Co. of Illinois v. McGurn, 257 Ill. App. 45.

The order of the superior court appealed from is affirmed.

Order affirmed.

McSurely, P. J., concurs.

Matchett, J., dissents.


author: Mr. Presiding Justice Barry

text:
    F. B. Hiller, Appellee, v. City of Pinckneyville and John Keene, Appellants.
    Opinion filed January 23, 1933.
    M. C. Cook and W. O. Edwards, for appellants.
    Nelson B. Layman, for appellee.
   Mr. Presiding Justice Barry

delivered the opinion of the court.

Appellee is a physician and conducts a hospital, the water supply for which is procured from the city. He rendered medical services to three persons who were in the employ of the city and for which he made a charge of $25 against the city. He made no showing that the city was liable for such services by virtue of a- contract or otherwise. He refused to pay for the water used unless the city would credit him with the $25, and for that reason his water supply was shut off. He then filed this suit and procured a mandatory injunction, without notice, requiring the city to turn on the water. After answering the bill, a motion was. made to dissolve the injunction and the same was denied.

Appellee admits that the water bill is just and correct. His sole contention is that he should only be required to pay the balance thereof after taking credit for the medical services aforesaid. If a consumer refuses to pay a bill and the city continues to furnish him water that he pays for, the city will not be permitted to shut off the water because of the nonpayment of the old bill. If the water is .shut off under such circumstances and a suit for injunction is brought, the city cannot litigate, in that suit, the validity of the old bill but must sue at law. 27 R. C. L. 1455; Wood v. City of Auburn, 87 Me. 287, 32 Atl. 906; Hatch v. Consumers Co., 17 Idaho 204, 104 Pac. 670; Holly v. City of Neodesha, 88 Kan. 102, 127 Pac. 616. If a city accepts a due bill from a consumer for water furnished and continues to furnish him water that he pays for, the city cannot shut the water off for a failure to pay the due bill. Crumley v. Watauga Water Co., 99 Tenn. 420, 41 S. W. 1058. If a city compels a purchaser of a building to pay back water rent under a threat that if he did not do so the water would be shut off, he may pay the bill and recover the amount from the city. City of Chicago v. Northwestern Mut. Life Ins. Co., 218 Ill. 40.

The law is well settled that a city will nqt be permitted to force the payment of a separate and distinct claim by shutting off the water or to litigate such a claim in a suit for injunction. That being true, appellee cannot litigate in this case the merits of his claim for medical services. If he thinks he has a valid claim he must sue at law. The order denying the motion to dissolve the injunction is reversed and the cause is remanded with directions to allow the motion and dissolve the injunction.

Reversed and remanded with directions.


text:
    George Thompson and Emma Thompson, Appellees, v. O’Gara Coal Company, Appellant.
    Opinion filed January 23, 1933.
    Miley & Combe, for appellant.
    Kane & Scott, for appellees.
   Mr. Presiding Justice Barry

delivered the opinion of the court.

Appellees are the lessors in a written coal mining lease which required the lessee to pay monthly royalties, to recover which this suit was brought against appellant, the assignee of the lessee. The lessee executed and delivered a deed to appellant in and by the terms of which all of the rights, title and interest acquired by the lease were conveyed to appellant. Appellant accepted the deed and the assignment of the lease and went into possession of the premises described therein and for a time paid the royalties to appellees. The declaration recites the foregoing facts and sets out the lease and the deed in haec verba. Appellant filed two special pleas relying upon the statute of frauds and a demurrer was sustained thereto. Appellant elected to abide by its pleas and the court rendered judgment in favor of appellees for $962.

The only question presented for our consideration is the alleged error in sustaining the demurrer to the special pleas. Appellant insists that as it made no written promise to comply with the terms of the lease it cannot be held liable for the payment of the royalties. When appellant accepted the deed containing the assignment of the lease it thereby became liable because it was then in privity of estate with appellees. Sexton v. Chicago Storage Co., 129 Ill. 318; Consolidated Coal Co. v. Peers, 166 Ill. 361; Consolidated Coal Co. v. Peers, 205 Ill. 531. The law is well settled that appellant as assignee of the lease became liable for the rent by reason of privity of estate and not because of the fact that it occupied the premises. 36 C. J. 375; 24 Cyc. 1180; Babcock v. Scoville, 56 Ill. 461. See also Smith v. Brinker, 17 Mo. 148; Hale v. Grow, 88 W. Va. 173, 106 S. E. 409; Moline v. Portland Brewing Co., 73 Ore. 532, 144 Pac. 572.

Appellant by accepting an assignment of the lease became liable because of privity of estate and the statute of frauds has no application. The court did not err in sustaining the demurrer to the special pleas and the judgment is affirmed.

Affirmed.