author: Mr. Presiding Justice Matchett

text:
    Benjamin L. Bird, Administrator of the Estate of Mildred L. Bird, Deceased, Appellant, v. Albert E. M. Louer, Appellee.
    Gen. No. 36,587.

      Opinion -filed December 11, 1933.
    Ashcraft & Ashcraft, for appellant; Russell F. Locke, of counsel.
    McKenna, Harris & Schneider, for appellee; James J. McKenna and Robert B. Lynch, of counsel.
   Mr. Presiding Justice Matchett

delivered the opinion of the court.

In an action on the ease, upon trial by the court without a jury, there was a finding for defendant and judgment thereon which plaintiff as administrator seeks to reverse by this appeal.

The amended declaration was in eight counts, plaintiff relying, however, upon only the first and the fifth. The first averred in substance that defendant was the owner of and he and his agents, servants and employees operated and used a certain aeroplane in carrying passengers from one airport or landing field into the air and returning to the airport or landing field and in carrying passengers from one airport or landing field to another, and divers other places, and that being such owner of the aeroplane he (defendant) and his agents, servants and employees on September 24, 1929, at a certain airport known and described as Sky Harbor, located at or near the intersection of Dundee road and Pfingsten road in Cook county, Illinois, invited Mrs. Bird, decedent, into said aeroplane as a passenger to be safely conveyed thereby from Sky Harbor and return thereto, and defendant, his agents, etc., conducted themselves so carelessly, negligently and unskilfully that while the aeroplane was conveying Mrs. Bird and while she was in the exercise of due care and caution for her own safety and before the arrival of the aeroplane at Sky Harbor, the same collided with another aeroplane and was forced, thrown or drawn to the ground, whereby Mrs. Bird was thrown with great force and violence upon the ground, and was then and there killed.

The fifth count averred the same general facts as the first: that defendant through his agents, servants and employees on September 24, 1929, invited Mrs. Bird into the said aeroplane as a passenger to be safely conveyed thereby on a journey from Sky Harbor and return, in consideration of a certain sum of money paid by her; that by reason thereof defendant and his agents, etc., ought carefully to have conveyed her, but not regarding their duty in that behalf so carelessly, negligently and unskilfully conducted themselves that the aeroplane while conveying deceased and while she was in the exercise of dne care and caution, collided with another aeroplane and was forced, thrown or drawn to the ground; that Mrs. Bird was then and there thrown with great force and violence to and upon the ground and was thereby killed.

Defendant filed a plea of the general issue and a special plea denying ownership and operation of the aeroplane.

The facts in the case were presented to the court by stipulation, from which and from statements made by the attorneys for the parties upon the trial, it appears as follows:

On September 24,1929, Mildred Bird, deceased, was the wife of the plaintiff administrator, and she died on that date as the direct and immediate result of the collision between two aeroplanes, in one of which she was then riding. Mildred Bird at the time of her decease left her surviving her husband (plaintiff) and a daughter six years of age. Louer, defendant, was the owner of the aeroplane in which deceased was being carried at the time of the collision, and he was her brother. In make and design defendant’s aeroplane was known as a Stearman, No. 8826. It was licensed by the United States Government to be flown by a duly authorized pilot. At the time of the collision this aeroplane was in the charge of Walter Meyer, who was a pilot duly authorized by the United States Government; he had a reputation for extraordinary skill as an aeroplane pilot and had about 3,600 flying hours of experience; he had flown a great number of aeroplanes of various designs, and he was flying defendant’s aeroplane at the time it left the ground and before the occurrence of the accident.

Mr. Meyer had given defendant instructions in flying. Meyer was a careful pilot and on this day was absolutely sober and had not been drinking. Meyer owned at least two planes of his own and employed at least two mechanics in his business. He maintained an air field where he sold gasoline and made repairs on aeroplanes. Defendant’s plane had been repaired in Meyer’s flying field by mechanics employed by Meyer, and the bill had been rendered by Meyer to defendant for these repairs. Meyer taught students to fly and charged for his services at the rate of $10 an hour if the student’s plane was used and $30 an hour if Meyer’s planes were used. Mr. Meyer also rented out other planes which he kept on his air field. His sole occupation was aeroplane work, as pilot, instructor, salesman, mechanic, or whatever is usual in such occupation.

Defendant Louer had an arrangement with Meyer that he should have the first call upon Meyer’s services unless Meyer was engaged in doing something else at the time. In that case Meyer would not be available to defendant until he had finished the particular matter upon which he was at that time engaged. If Meyer was not otherwise engaged defendant had him and his »services whenever he (defendant) wished. Meyer charged Louer $10 an hour for flying his plane and flew it to whatever destination he was told to fly it.

Mr. Bird, complainant, had an understanding with his brother-in-law, Louer, that he could have the use of the plane whenever Louer was .not using it, provided that Meyer was available to fly the plane. It had been the usual practice for Louer to pay Meyer whenever he took either Louer or Bird up in the plane, and Bird thereafter reimbursed Louer for the use of the plane in such amounts as represented the expense Louer was put to through Bird’s use of the plane.

Whenever Louer wanted to go on a trip he would reach Meyer by telephone and if Meyer was not occupied he would accompany Louer as his pilot. On these trips Meyer would use his own discretion as to how to fly or manage the plane, although Louer would tell him where he should go and Louer was under no obligation whatsoever to make use of Meyer’s services, except as he, Louer, might choose so to do.

On the date of the accident the Stearman plane was in good working order, in that all the elements and parts of the ship which controlled the operation and movement of the plane and the mechanical appliances were all in proper working order. The day on which the Accident occurred was a clear, warm day with very little wind, and at the time of the accident, which was approximately six o’clock in the afternoon, good weather conditions prevailed; there was nothing in the air conditions to obstruct the visibility of aeroplane pilots.

On that day Mr. Bird called defendant’s office and was informed that defendant would not be in until it was time for Mr. Bird to take the train for the airport. Mr. Bird, a Mr. Page Tiboudeaux, Major John Schroeder and a Mr. Bussell Locke, then left Bird’s office by train for Highland Park, where they met Mrs. Bird and all motored f-rom there to Sky Harbor. Louer therefore did not know his plane was being used this day until after the accident. In the meantime Bird had telephoned to Meyer and asked him, to come to Sky Harbor to fly Loner’s plane and to give Bird a flying lesson. Major Schroeder was a friend of the parties and had assisted defendant Louer in the purchase of the aeroplane. On previous occasions Louer had invited Major Schroeder to ride in the plane, but Schroeder had never done so.

The aeroplane had accommodations for a pilot and two passengers; it had a front and a rear cockpit; it is termed an “open ship” and could be operated from either cockpit. When the plane left the ground at Sky Harbor there was a joy stick in each cockpit. Mr. Meyer and Mrs. Bird occupied the front cockpit and Major Schroeder occupied the rear cockpit.

It had been determined before the arrival of Meyer at Sky Harbor that Major Schroeder and Mr. Bird would be taken to Maywood and that after landing Major Schroeder at Maywood, Meyer would give Mr. Bird a lesson in flying* on the way back, but at the last mom.ent Mrs. Bird decided that she would like to take the ride, so she went over instead of Mr. Bird.

The plañe was taken off the field by Meyer, who was flying* it from the front cockpit.

The joy stick controls the direction of flight or the maneuvering of the aeroplane, except for the rudder bar. The joy stick controls the ailerons. .When the joy stick is moved to the left, the right-hand aileron is tipped downward and the left aileron tips up so that the plane is made to turn on its axis to the left and conversely; when the joy stick is pulled or turned to the right, the opposite action is effected. In order to make the ship go up or down, the joy stick is pulled backward or pushed forward by the pilot. The direction of the plane is controlled by a rudder which controls the horizontal circle in which the plane moves when the wings are horizontal with the ground. This rudder is moved by a rudder bar which is operated by the feet of the pilot, and the rudder is turned much as in an ordinary sailing ship in order to turn the plane to right or to left. If the ship, instead of flying level, is put in a vertical angle, so that instead of the wings being horizontal with the ground they are in a vertical position with the ground, then the rudder would not have any effect toward turning* the ship to the right or to the left, since the rudder would then move up or down and not from side to side. .

The journey in the plane from Sky Harbor to May-wood was made by the parties in about 15 minutes. Major Schroeder then got out of the plane. Meyer got into the rear cockpit and immediately took off in the direction of Sky Harbor with Mrs. Bird sitting in the front cockpit. Within 15 minutes thereafter the ship approached Sky Harbor from the south and traveled toward the landing field at Sky Harbor, flying in a northwesterly direction.

When the aeroplane reached a point about a mile south and a little to the east of Sky Harbor and in a position between 600 and 1,000 feet above the ground, it collided with another aeroplane, which struck defendant’s aeroplane on its right side. This second plane was described as a Standard, and at the time of the collision was operated by a person who was not a licensed pilot,

Mrs. Bird was not a pilot and had never taken lessons in flying so far as was known to the parties; she had, however, frequently ridden in aeroplanes and was well aware that she could not operate an aeroplane and that it would be dangerous for her to attempt to do so.

Just before the collision, while Loner’s plane was flying north, the Standard was flying south. The Standard had risen from the ground and circled the field of Sky Harbor after the takeoff and then had headed south. It was well known around the airport at Sky Harbor that the pilot of the Standard was inefficient ; for instance, in making a turn he would just kick the rudder and not use the ailerons, causing the plane to turn but also to skid; he had also been seen frequently to violate the Department of Commerce rules by stunting too close to the ground.

The Stearman plane was in good condition, and at the time it took off from the airport in charge of Meyer, he was perfectly sober, in good condition and an efficient pilot. There was no record that he had been accustomed to violate the rules as to stunting and like things.

At the time of the accident the wind velocity was about 25 miles an hour running due west or northwest. The Loner plane was visible to the pilot of the Standard, who apparently seemed to make a turn to avoid the collision but made a flat turn so that his plane skidded and the right wing hit the right wing of the Louer plane. The Louer plane was moving up in accordance with regulations to make a left turn and make a straight landing therefrom. Meyer knew the regulations as to left-hand turns in making a landing at Sky Harbor, and it is stipulated that at the time of the accident he was obeying Sky Harbor regulations.

The visibility in the Stearman plane is better than in most planes, probably as good as any, but there is a blind spot directly ahead so that when the aeroplane is in normal flight the pilot cannot see directly ahead and cannot see a plane which is close in front of him, if it is exactly at the same altitude as his plane. The plane could, however, be maneuvered to give visibility in any direction.

The Standard plane was not airworthy. The Louer plane when examined after the accident was found to be in good condition so far as the material comprising it was concerned. Just before the accident the Louer plane was traveling about 90 miles an hour and the Standard about 40 miles an hour.

There is no claim that defendant was engaged in the business of carrying passengers by aeroplane. The flying field which Meyer managed was a few miles from the scene of the accident. In his business there Meyer used letterheads with the words, “Meyer Air Transport” printed on them. Meyer’s price for flying Louer’s plane was $10 an hour, and he charged the same sum for flying the plane of any other person. Defendant was a student pilot, but he gave no orders or direction to Meyer as to the management of the plane. As a matter of fact, Mr. Bird invited Major Schroeder to take the ride in the plane. Mr. Bird had previously taken lessons from Meyer and was warming up the plane when Meyer arrived at the airport. Meyer was late in arriving at the airport. Major Schroeder had an engagement for dinner at Maywood, and the plans of the parties were arranged with reference to this.

It was stipulated that it was not known who was operating the Louer aeroplane at the moment of impact, as all of the parties in the collision died without making any statement. The two aeroplanes were apparently on a level at the time of the collision. They would have missed each other at any reasonable distance above or below. Defendant was sued as a matter of fact because the pilot of the other plane was not supposed to be financially responsible. The driver of this other plane was Charles L. Kron, who was also killed in the accident. Mr. Kron was not a licensed pilot; he did not have even a student’s license; he had been frequently seen operating a Standard plane and impressed observers as being inefficient, and in making a turn he was apparently unaware that anything should be used save a rudder. One person alone, it was stipulated, had seen Kron at least 50 times flying in his inefficient and unskilful manner. Kron had also been seen frequently violating Department of "Commerce rules by. stunting too close to the ground. The Standard plane had been used for carrying passengers, and complaint had been made to the Department of Commerce. Apparently, whoever was operating the Louer plane was obeying Sky Harbor regulations. The Standard plane was old and somewhat rotted, so that a nail file could be dug into it. It is stipulated that the Standard plane should have been condemned. There was no evidence as to whether the planes came in contact with any air pockets.

It is contended in behalf of plaintiff that the relationship of principal and agent or master and servant existed between Meyer and defendant with reference to the operation of defendant’s aeroplane at the time of the collision, gnd that the rule of respondeat superior is therefore applicable; that the deceased was a passenger on this aeroplane, and that "defendant therefore owed to her the duty of exercising reasonable care to the end that she' might not be injured, and this whether she is considered a passenger for hire or a passenger by invitation. It is further contended that Meyer as a servant of defendant did not exercise such care and that defendant is therefore liable to pay a fair and just compensation to the next of kin of the deceased in light of the pecuniary injuries suffered. On the other hand it is contended by defendant that Meyer was not .the agent or servant of defendant at the time of the collision; that the deceased at any rate was not a passenger for hire; that there is no proof that the heirs were in the exercise of due care for the safety of the deceased at the time of the accident, and further, that there is an entire absence of proof that the deceased was in the exercise of due care for her own safety at the time of the collision.

Several of these points are of controlling importance. If Meyer when flying the aeroplane was not the agent - or servant of defendant, but, on the contrary, as defendant contends, the agent and servant of Bird, then the rule of respondeat superior would not be applicable and defendant as a matter of law would not be liable. Plaintiff contends that Meyer was the agent and servant of defendant and cites, with other cases, Meyer v. Industrial Commission, 347 Ill. 172, where in a proceeding brought by Mrs. Meyer, under the Compensation Act, growing out of this same accident, it was held by our Supreme Court that defendant was engaged in a “business or enterprise” within the meaning of section 4 of the Compensation Act, Cahill’s St. ch. 48, U 204; that Meyer was an employee of defendant, who at the time of the accident was acting within the scope of his employment within the meaning of section 5 of the Compensation Act; that Meyer was not an independent contractor and was the servant of defendant Louer at the time of "the accident.

Defendant says that the opinion correctly stated the law upon the facts there appearing in the record, but that it is apparent the Supreme Court was not informed that Bird in reality paid the charges of Meyer for piloting the plane, in that he reimbursed defendant for whatever expenses were incurred in its operation; also, that the Supreme Court was not informed that Meyer had mechanics of his own working for him and that he did business under the name, “Meyer Air Transport,” or that Meyer sold gasoline at his air field, or that Meyer owned other aeroplanes which he rented, or that Bird had exercised dominion over the plane upon the day of the accident which was unauthorized, namely, in the loaning of it to Major Schroeder, with Mrs. Bird as a guest.

The case there was not between the present parties and therefore it cannot be said in this proceeding that this question of relationship between Meyer and defendant Louer has been adjudicated. Nevertheless, the opinion is not without weight in the determination of that question.

The inference here from all the facts, briefly stated, is that defendant loaned his aeroplane to Bird upon the condition that it should at all times be flown by his pilot Meyer. Where a master temporarily loans or hires his servant to another for some special service, and the servant is placed wholly subject to the person to whom he is loaned or hired and wholly freed from the control and direction of his general master, he may for the time being become the servant and agent of the person to whom he is loaned or hired. This rule was stated in Densby v. Bartlett, 318 Ill. 616, where, however, it was held after a review of many authorities that a party who hired an automobile and driver of the same for the use of his customers in a real estate business, was not responsible for the negligence of the driver, although the hirer had the right to direct the driver of the' automobile when and where he was to go. That decision seems to hold that the right to discharge is essential to the relationship of master and servant. The contract there with reference to the automobile and its driver seems not unlike the contract between Loner and Bird with reference to the aeroplane and its pilot. Certainly, Bird under the arrangement did not have either the power or the right to discharge Meyer. Indeed, one condition of the loan or hiring of the aeroplane was that it must be piloted by Meyer alone. We therefore hold that Meyer was the agent and servant of defendant Loner and that the rule of respondeat superior is applicable to the facts of this case.

It is also contended by defendant that plaintiff failed to prove that the deceased was in the exercise of due care for her own safety at the time of the accident. Newell v. Cleveland, C., C. & St. L. Ry. Co., 261 Ill. 505, and many similar cases are cited. All the persons in both aeroplanes which collided were killed at the time of the collision; hence, there were no eyewitnesses to the accident. No proof was offered as to the habits of care, etc., on the part of the deceased.

Whether the general rule stated in the above and other cases as to the necessity that a plaintiff prove freedom from contributory negligence is applicable to an action growing out of a collision of aeroplanes far above the surface of the earth, it is not necessary for us to decide in view of the fact that we have come to the conclusion that there was no negligence on the part of. Meyer which would permit plaintiff to recover. However, if we assume that this rule of law as to accidents which happen upon the land is also applicable to accidents which happen in the air under circumstances such as here appear, it would seem that proof of the hiring of a duly licensed pilot skilled and experienced, the placing of him in charge of the aeroplane before the deceased became a passenger, and further, the performing of great care in making sure that the aeroplane was in perfect running order and in good condition, should be prima facie sufficient to establish the fact that the deceased and her husband were in the exercise of due care for her safety. We assume, of course, that the six-year-old child would prima facie be without negligence in the matter.

The controlling question for our consideration therefore is whether defendant or his pilot Meyer could under the evidence reasonably be said to be guilty of negligence proximately tending to cause the collision. The trial court has found for defendant on this issue, and that finding of the trial court is entitled to'the same weight as the verdict of a jury. The ultimate question for our determination therefore is whether that fiudiug of the court is clearly and manifestly against the weight of the evidence.

Defendant argues that the allegation of the declaration that the deceased was invited to ride as a passenger was not proved and says that as a matter of fact the proof shows that defendant did not know that Mrs. Bird was to become a passenger. If, however, we are right in holding that Meyer was the agent and representative of defendant, this contention is without merit, for Meyer knew of the invitation to Mrs. Bird, which was either express or implied, and his knowledge would also be the knowledge of defendant. It is also argued that there is no proof that Mrs. Bird was conveyed as a passenger for a consideration as the declaration alleges. The evidence, however, indicates that she was not carried in the plane gratuitously, although the proof comes far short, we think, of proving that defendant was a common carrier. McCusker v. Curtiss Wright Flying Service, Inc., 269 Ill. App. 502. However, whether she was a mere invitee or passenger for hire, we hold the servants of defendant were obligated to use reasonable care to the end that she might' not be injured. Indeed, that would probably be the proper rule even if she were being carried gratuitously on a trip for pleasure. That is the rule applicable to conveyance by automobile. We see no reason why the rule should not be reasonably held applicable in case of transportation by aeroplane. Hibernian Banking Ass’n v. True, 228 Ill. App. 194; Collins v. McMullin, 225 Ill. App. 430.

Plaintiff has argued quite at length that the uncontradicted evidence shows that Meyer was negligent; and he bases this argument upon the fact that Meyer was an experienced aeroplane pilot who presumably knew all the dangers and consequential needs of flying ; that he had taught students to fly and he was flying an aeroplane of the very latest design which was in good working order, and that all the forces of nature were giving him assistance by offering a clear, warm day with perfect visibility; that he was flying an aeroplane which would, as he knew, with proper manipulation of the controls at his command, give him a clear, unobstructed and correct view of the ground and the space above the ground as far as his eyesight could detect; that he was able, at the time of approaching Sky Harbor, to see not only the airport with its markings indicating the proper place to land, but also to see any other aeroplanes that might have been in the air, either near him or at any considerable distance from him; that he knew that this airport was a public airport and that it was a place where other aeroplanes would surely be found, either on the ground, leaving the ground, flying in the air around the airport or preparing to land; that he knew or should have known, that at the time he was approaching Sky Harbor preparatory to landing it was not only possible but quite likely that other aeroplanes were being flown at or near Sky Harbor; that he knew too the construction of an aeroplane and knew, or should have known, that a collision between the aeroplane he was flying and another aeroplane at a height of 600 to 1,000 feet would inevitably cause both aeroplanes to fall to the ground and result in the death of the passengers; that he knew his plane was maneuverable and knew that he could have controlled the direction of flight of his plane at will; that he could cause the plane as he approached Sky Harbor to raise or descend, to turn to the left or to the right at almost any angle he chose; that he had almost an unlimited area in which to maneuver his plane approaching Sky Harbor, at his will; that he was flying a plane that had a speed greater than that of any other plane in the air at the time of the accident, and, according to the record, much greater than the plane with which his plane collided. Plaintiff says that notwithstanding all these facts Meyer permitted the plane he was flying to collide with the other plane and thereby caused the death of Mrs. Bird. Plaintiff says that if Meyer had looked he would have seen the aeroplane with which he collided; that if it had been miles away he could have instantly determined whether or not the other aeroplane was approaching Meyer’s plane; that he could have at any time for a period of minutes, father than seconds, before the accident, changed his line of flight so that it would have been impossible for the other aeroplane to have approached him, much less to have collided with his plane.

Quite obviously, then, plaintiff argues, one of two things happened: Meyer saw the other plane and deliberately, wilfully and wantonly caused his plane to collide with the second one, or Meyer failed to look, because if he had looked he would have seen the other plane, and plaintiff says, “This we charge to be the most unreasonable lack of care conceivable.” Plaintiff says that it would have been an unreasonable lack of care for a novice to have flown an aeroplane, which he knew traveled 90 miles an hour or more, through space where other objects were moving, without taking special precautions to see what obstruction there might be in his line of flight; and therefore it is said, “Meyer’s lack of care is directly commensurate with the great experience the record shows he had and his consequential knowledge of the attending dangers. That Meyer failed to look and so was responsible for the accident does not discharge his liability where there was nothing to obstruct his vision. There being nothing to obstruct his vision, it was negligence for him not to see a danger which was as clearly visible as the aeroplane with which he collided.” Plaintiff cites Koenig v. Semrau, 197 Ill. App. 624.

On the other hand, defendant argues that the proof fails to show that Meyer was in fact piloting the plane at the moment of the accident and points out that the stipulation says that the pilot was unknown and therefore it may not be argued that it was Meyer, and not Mrs. Bird, who was piloting the plane. We are inclined to the view that the presumption is that Meyer was piloting, and assuming this to be true, we are unable to find the evidence in the record from which negligence may justly be inferred. As defendant suggests, the planes may have come into an air pocket or may have experienced sudden gusts of wind. There may have arisen some defect in the motor. We can hardly indulge the presumption that because Meyer was extraordinarily capable he therefore must have been entirely negligent. In the absence of direct evidence the presumption is otherwise because of the .conceded facts of Meyer’s skilfulness, his careful habits, etc. The just inference is that these did not desert him at the precise moment the accident occurred, nor is there evidence from which an inference might be drawn that it was his desire to lose his own life as well as that of Mrs. Bird who was riding with him.

Further, we think Meyer was not (in the exercise of due care) obligated to know that the pilot of the Standard aeroplane, Kron, was unskilful; that he was an inefficient and unlicensed pilot. The stipulations are to the effect that the proper way to turn an aeroplane is to pse both rudder and ailerons to bank the plane on the turn. Apparently Kron was ignorant of this fact, but there is no stipulation to the effect that Meyer knew of Kron’s ignorance and inefficiency. It is stipulated to the effect that the skidding of the Standard aeroplane was the cause of the accident and that the Standard aeroplane skidded because the pilot was inefficient, ignorant and careless. Indeed, under the facts as set forth in the stipulation we may not assume that Meyer was negligent in failing to see the Standard plane at about the .time of the accident. The stipulation is to the effect that the visibility in the Loner plane was better than in most planes and probably as good as any, but that there was a blind spot directly ahead so that when the aeroplane was in normal flight the pilot could not see directly ahead and could not see a plane which was close in front of him if it was exactly at the same altitude as his plane. The stipulation is further to the effect that the two planes were on the same level when they collided. We conclude from the undisputed facts that the proximate and immediate cause of the collision in which Mrs. Bird lost her life was the negligence and inefficiency of the pilot of the Standard plane, and that there is no evidence from which an inference may be reasonably drawn that Meyer was negligent.

Plaintiff finally says that there is no precedent in the law for this court in its determination of the issues in this case; that no court of law has ever before had to state a rule that would serve as a precedent for present and future regulations of human affairs in the light of the circumstances involved in this case and the consequential needs of the people. The rules of law applicable to aviation, however, must be based upon the facts which appear in the record, and whether the action is based on an accident on land or on sea or in the air, we think the court may not hold a defendant liable without proof of some duty which has been neglected. Plaintiff’s case is not based upon the theory that the owner of an aeroplane is an insurer of the safety of passengers. His action is grounded upon alleged negligence which he assumed the burden of proving. We cannot say that the finding of the court in favor of defendant is clearly and manifestly against the evidence.

For that reason the judgment of the trial court is affirmed.

Affirmed.

O’Connor and McSurely, JJ., concur.


source: Caselaw Access Project

license: Public Domain

text:
    Tampa Investment and Securities Company, Defendant in Error, v. Orville J. Taylor, Plaintiff in Error.
    Gen. No. 36,746.

      Opinion filed December 11, 1933.
    Rehearing denied and opinion slightly modified December 27, 1933.
    Francis X. Busch and James J. Magner, for plaintiff in error.
    McCulloch, McCulloch & McLaren, for defendant in error.
   Mr. Presiding Justice Matchett

delivered the opinion of the court,

Ill an action in assumpsit upon two promissory notes and upon trial by jury, the court at the close of all the evidence, upon motion of plaintiff, directed the jury to return a verdict in favor of plaintiff for the sum of $7,850, and overruling .motions of defendant for a new trial and in arrest, entered judgment on the verdict.

Defendant contends the court erred in refusing and rejecting evidence offered by defendant.

The notes in question were executed at Tampa, Florida, December 15, 1925, are for $2,500' each, to the order of “Carl P. Fish, trustee,” draw interest at the rate of eight per cent per annum, payable semiannually, and are signed:

“Orville Taylor R. R. Demeter As trustees.”
Each of the notes is indorsed on the back:
“ Carl P. Fish,
trustee,
C. P. Fish.”

The notes were executed and delivered to the payee Fish in payment of the purchase price of real estate in Florida, sold by Fish as trustee to a syndicate composed of defendant Fish himself and other persons. Taylor and Demeter took title to the real estate for the syndicate. Thus Fish was vendor trustee in the transaction and trustee payee of the notes, as well as a beneficiary member of the purchasing syndicate. The purchase price was $100,000. Fish received $40,000 in cash, notes of Taylor and Demeter as trustees for $30,000, secured by a first mortgage on the real estate sold, and notes of the same trustees for a like amount, secured by a second mortgage on the same property. The notes here sued on are a part of the last series. Thus Fish as vendor and payee and beneficiary had full knowledge of the entire transaction.

The evidence for plaintiff tends to show that one O’Berry was indebted to the Exchange National Bank, which held notes of Pish as collateral, and that one of these notes for the amount of $10,000 had matured June 23, 1926. Fish and O’Berry went to the bank, and Fish paid $8,000 in cash on his note and gave a note to O’Berry for the balance of $2,000. The three notes were then delivered to the bank as additional security for O’Berry’s debt.

Mr. Perry, an officer of the bank, who arranged the transaction, says he made no inquiry about the words, “as trustees” appearing on the note of defendant. These notes taken by the bank June 23,1926, were held by it until the latter part of June, 1928, when the bank adjusted O’Berry’s debt, receiving the $2,000 note of Fish with the notes sued on as collateral. The bank then sent the notes to Chicago to be presented for payment, which was refused, whereupon,- after notice by mail, the bank on October 29,1928, sold these two notes to plaintiff for $25. Plaintiff is and then was a subsidiary of the bank. The secretary of plaintiff was the cashier of the bank. The stock of plaintiff was held for the benefit of the stockholders of the bank, and a number of the officers of the bank were also officials of the plaintiff corporation.

Defendant offered to prove that pursuant to an oral agreement and understanding between him and Fish, defendant executed the notes in behalf of certain individuals who were then made known to Fish, and that it was agreed defendant was not to be personally liable thereon; that this agreement was made between Fish and Taylor at Tampa, Florida, in several conversations which were had there between Taylor and Fish in the presence of third persons, and also on other occasions when no one except Taylor and Fish was presentthat the notes sued on, the mortgage and the declaration of trust were prepared by T. Paine Kelly, Florida counsel, were then mailed to defendant at Chicago for his signature, were signed there by him and deposited in the United States mails and mailed back to- T. Paine Kelly for delivery to the payee, Carl P. Fish, trustee; that the notes sued on were two of a series in the amount of $30,000, secured by a mortgage executed with respect to land located in the city of Tampa, Florida; that this ground was purchased by a group of individuals consisting of Speidel, Bischof, Hegeman, Carl P. Fish, R. R. Demeter and defendant Orville J. Taylor; that it was expressly understood among these parties that in signing the two notes sued on, defendant was not to be personally responsible for 'the payment of them; that the interests of the group were:* Carl P. Fish, the payee, a one-tenth interest, R. R. Demeter a one-tenth interest, Mr. Bischof a one-fifth interest, Speidel a one-fifth interest, Hegeman a one-fifth interest, and Orville J. Taylor a one-fifth interest; that whenever any instalment of interest on the principal notes became due, Taylor was called upon by Fish, the payee, for only a one-fifth part of the then maturing instalments of principal and interest, respectively ; that all of the notes of the series were executed in the same manner as the two notes sued on; that in conversations held between Taylor and Fish in Chicago, while the notes were in the hands of the bank in Florida, Fish told Taylor that he had delivered these notes to the bank and had explained the whole transaction to the bank at the time the notes were delivered to it; that he had talked with a Mr. Griffin in the bank and told him who the members of the syndicate were and of the understanding as stated between himself and defendant Taylor.

Defendant further offered to prove that in conversations with Fish and other persons of the syndicate in Tampa, Florida, in the week commencing November 22, 1925, when the arrangements had been made for the purchase of the property, he stated that he wanted information as to the method under which the transaction would be handled; that he was informed by Fish and other persons that the normal procedure was that of having a trustee appointed; further, that defendant would testify that he stated that he was acting in essentially the capacity of a principal and in no sense as an attorney; that he was not familiar with the methods of handling real estate transactions in Florida; that if this transaction were in Chicago it would be escrowed, guaranty policies issued, and it would be handled with great care and caution; that he was informed by Fish and others in this group that transactions to the number of 15 to 20 a day would be handled on one piece of propérty; that to his recommendation that a bank be appointed as trustee the objection of delay and expense was ¡offered; that he then called upon Fish and his group to have the best real estate lawyer that could be found in Tampa handle the matter; that Taylor and Fish went to the office of T. Paine Kelly, the lawyer recommended by Fish; that Kelly told Taylor that there was no personal liability under a trusteeship of the character involved; that it was not necessary to even so much as sign the notes as trustee, as long as on the face of the document the words “as trustee” appeared; that Kelly told Taylor, in the presence of Fish, that there could be no recovery even so much as against a syndicate in the transaction, that the property itself was security for the loan and would be taken back under the law and any deficiency canceled; that the documents were prepared by Kelly and sent to Taylor in Chicago; that when the documents were received by Taylor in Chicago they did not bear the words “as trustee” on the face of the notes, and that Taylor changed these notes, adding the words “as trustees” and returned them to Kelly for delivery in Florida to Fish; that in 1928, for the first time, Taylor was notified by the Exchange National Bank that it held these notes and demanded payment; that in reply Taylor September 11, 1928, sent a letter to the bank disclaiming personal responsibility; that thereafter in conferences with Fish in Chicago and in New York, Fish told Taylor in substance that he had arranged the transaction with the bank and that defendant need not give any concern to it; that Fish further told Taylor that the bank held a mortgage on Fish’s house and that the bank was at all times familiar with the whole transaction. This offered evidence, considered with that received, tended to show that the Exchange National Bank, when it took the notes from Fish, had full knowledge of the entire transaction and the holder was to look solely to the land for payment of the notes.

The court refused and denied this offer of proof and directed a verdict as stated.

An examination of the briefs of the parties discloses that they agree that where the maker of a negotiable instrument has a good defense as against the payee, a pledgee of the instrument in a suit thereon may recover only the amount actually loaned or expended by him upon the security of the collateral. Plaintiff, however, contends that the rule is not applicable in any case until after defendant has established a defense as against the original payee, and we think that contention is sustained by the authorities. Tooke v. Newman, 75 Ill. 215; Henderson v. Davisson, 157 Ill. 379; Burns v. Landrum, 238 Ill. App. 191; Jones v. Central Hanover Bank & Trust Co., — Fla. —, 147 So. 895. We think, however, it may not be held that plaintiff by its purchase of these notes for the practically nominal sum of $25, got any better title than that of the vendor bank. The sale took place long after the maturity of the notes. The real beneficial ownership of the notes after the sale was in the same persons as before, namely, the owners of the stock of the bank for whose benefit all the stock of the securities company was held. Evans v. Marsh, 116 Cal. App. 441, 2 P. (2d) 882.

The real question therefore turns on the question of whether the oral evidence offered was wrongfully excluded, or whether defendant could by parol evidence establish a good defense as against his payee, Pish, or a holder taking with notice.

Plaintiff contends stoutly for the proposition that a maker who executes an instrument as trustee binds himself personally and no one else, upon the theory often stated in the cases, that a trustee is a principal and not the agent of any other, and that when such a trustee contracts he is personally and individually obligated to perform, after which he is entitled to reimbursement out of the trust fund. In support of this theory plaintiff cites a large number of cases, such as Wahl v. Schmidt, 307 Ill. 331; Austin v. Parker, 317 Ill. 348; Schumann-Heink v. Folsom, 328 Ill. 321; Taylor v. Mayo, 110 U. S. 330, and Wilson v. Bodamer, 261 Ill. App. 23, where this court so held in suits which were not based on negotiable paper.

Plaintiff further maintains that parol evidence is not in such case admissible for the purpose of showing that a maker who thus signs is not in fact personally liable, and in support of this contention cites the Illinois cases of Powers v. Briggs, 79 Ill. 493; Hypes v. Griffin, 89 Ill. 134; Scanlan v. Keith, 102 Ill. 634, and similar cases based on negotiable notes. It also contends that the law of Florida is similar.

The controversy turns upon the construction to be given to section 20 of the Uniform Negotiable Instruments Law, which, in identical language at the time of this transaction was in force both in Florida and in Illinois and which has now been adopted in all the States with two exceptions. That section is as follows (see Brannan’s Negotiable Instruments Law, Anno., 4th ed., p. 163):

“Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of the principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized ; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability.” Cahill’s St. ch. 98, ¶40.

The history which led up to the enactment of this statute in so many of the States is recited in 2 Michigan Law Review 260, and it appears that the language of this section 20 was very largely determined by what the bar generally believed to be the unjust result reached in the case of Roger Williams Nat. Bank v. Groton Mfg. Co., 16 R. I. 504, where the trustees of an estate acting in conformity with the directions of the testator were held personally liable upon a promissory note they had indorsed:

“Amos D. Smith & Co. Francis M. Smith, Charles Morris Smith Trustees Estate of Amos D. Smith.”

Section 20 changed the previous rule that a name followed by a designation as to some relationship to another would be considered only descriptio personae and the maker therefore personally liable. Professor Brannan says (Brannan’s Negotiable Instruments Law, 4th ed., p. 164):

“The plain language of this section indicates that it was the intention of the draftsman and the commissioners to clear up the unnecessary and unpardonable confusion caused by the failure of some of the courts to exercise a little common sense and to recognize mercantile usage. Much of the difficulty found in this subject is purely manufactured and would not trouble a business man for a moment.”

Defendant admits that under a plain construction of this section he would be prima facie personally liable because while the note discloses that he was acting in a representative character it does not disclose the principal for whom he acted. However, defendant contends that his signature as made creates an ambiguity, which, as between the original parties to the paper, or those taking it with notice, may be explained by parol evidence.

The question is purely one of statutory construction, and cases (of which there are many) where the statute was not called to the attention of the court or considered, are of little value. In National City Bank of Chicago v. National Bank of Republic of Chicago, 300 Ill. 103, our Supreme Court has laid down the rule which should be followed in construing this statute. It says:

“In order to keep the law as nearly as may be uniform, the courts of all the States should keep in mind the spirit and object of the law and should give to the language of the act a natural and common construction, so that all might be more likely to come to the same conclusion. ’ ’

In Megowan v. Peterson, 173 N. Y. 1, the plaintiffs sued a defendant upon a note which was signed, ‘ ‘ Charles Gf. Peterson, Trustee. ” Peterson was in fact the trustee appointed by creditors to liquidate the business of Johnson & Peterson. Upon the trial Peterson produced oral testimony tending to show that he acted as such trustee for the completion of certain buildings begun by the insolvent firm, and for that purpose purchased lumber of the plaintiffs under an express agreement that they would accept his note as such trustee. Plaintiffs testified to the contrary, and at the conclusion of the evidence the court, upon application of the defendant, dismissed the complaint upon the ground that no cause of action had been established against defendant, while the plaintiffs asked that they be permitted to go to the jury upon the controverted fact as to whether the plaintiffs gave credit to the defendant in his representative capacity or as an individual. The court construed this section of the Negotiable Instruments Law as applicable, and the plaintiffs contended that the defendant was liable because his representative character was not disclosed “upon the face of the note.” The court held that this would be true so far as innocent purchasers for value were concerned, but as to the payees named in the note a different rule would prevail. The case of First Nat. Bank of Brooklyn v. Wallis, 150 N. Y. 455, was cited. The court further held that the parol evidence raised an issue of. fact for the jury. The judgment was reversed and the cause remanded for a new trial.

In Kerby v. Ruegamer, 95 N. Y. S. 408, the. defendants, who as trustees for creditors were completing buildings, executed a note, signing their names, to which was added “as trustees, etc.,” and the court on the authority of Megowan v. Peterson, supra, again held that although the note upon its face did not disclose that the consideration thereof was for the benefit of creditors, as between the original parties to the paper, this was not necessary and that parol evidence to show the actual facts was admissible.

Plaintiff contends that Megowan v. Peterson was illy considered, but the Court of Appeals of New York does not seem to take this view, as shown by the opinion in New Georgia Nat. Bank v. Lippmann, 249 N. Y. 307, where construing section 20 on another point, the opinion stated: “Nothing in our present ruling is opposed to what was held in Megowan v. Peterson (173 N. Y. 1).”

The highest court of Kentucky agrees with that of New York. Riordan & Co. v. Thornsbury, 178 Ky. 324. There a note was signed by five trustees of a Methodist church, each of them adding after his name the word “trustee,” and the instrument in no place disclosing the principal for whom the trustees acted. The court cited 3 B. C. L. 1095, and held the Negotiable Instruments Law applicable, parol evidence admissible, and that the defendants were not personally liable in a suit between the original parties.

The same construction seems to have been put upon this section of the act in New Jersey where, in Phelps v. Weber, 84 N. J. L. 630, 87 Atl. 469, it was held that the personal liability was only prima facie and that parol evidence was admissible to show the intention of the parties even against a bona fide holder for value.

In Gutelius v. Stanbon, 39 F. (2d) 621, the trustees of a realty trust who signed their names “trustees of the (named) Bealty Trust,” were held not personally liable under section 20.

In McFarland v. Shaw, 45 S. W. (2d) 193, decided by the Commission of Appeals of the State of Texas January 6, 1932, a note was signed:

“Susie L. McFarland

Surviving Widow of C. S. McFarland W. S. McFarland Ethel McFarland

Sole Heirs of C. S. McFarland, deceased”

It was held that the defendants might show by parol evidence that at the time the note was signed it was agreed that the signers were not to be personally liable. The opinion discusses (with innumerable citation of authorities) the parol evidence rule, cites section 20 of the Negotiable Instruments Act and states that if the issue of an innocent purchaser for value was in the case, the contention of the payee that section 20 is controlling might be true. The opinion also cites with approval Megowan v. Peterson, 173 N. Y. 1.

We have not thus far considered cases by the courts in Florida, the lex loci contractus, or in Illinois, the lex fori, construing this-section.

Plaintiff contends that whatever the rule is in other States, parol evidence is not admissible in Florida or in Illinois.

Plaintiff cites Higgins v. Driggs, Admr., 21 Fla. 103 (where an. executrix who executed a note, “Ellen F. Adams, Executrix of the Estate of J. S. Adams,” was held personally bound before the enactment of the Negotiable Instruments Law), and Robinson v. Springfield Co., 21 Fla. 203 (also decided before the enactment of the Negotiable Instruments Law, where certain notes and a mortgage securing same were executed, “Joseph D. Mitchell, Trustee,” and “C. L. Robinson, Trustee, ’ ’ and the makers were held personally liable, no parol evidence being offered.)

In Sparks Enterprises v. Christman, 95 Fla. 928, the plaintiff sued on a promissory note executed November 18, 1925. The maker added no words to indicate a representative capacity. He sought to show an oral agreement at the time of execution that the payee would look only to a mortgage given as security for payment. It was held he could not show such agreement on the authority of Forbes v. Ft. Lauderdale Mercantile Co., 83 Fla. 66. The Negotiable Instruments Law was not cited, and this particular section was of course not applicable.

Phillips & Co. v. Hall, 99 Fla. 1206, was decided by the Supreme Court May 28,1930. There the note sued on was signed by five persons who designated themselves as principals and as “Board of Trustees of Methodist Episcopal Church, South, LaBelle, Fla.” The signers were held liable as to an innocent holder for value, citing section 20 of the statute. There was no question of parol evidence in the case.

In Spofford v. Hanna, 102 Fla. 261, 135 So. 536, in which an opinion was filed as of June 30, 1931, a note and mortgage were executed, “Roy S. Hanna, As trustee only and not individually.” A demurrer to the declaration was sustained upon the ground that it appeared that the instruments were executed in a representative capacity and not as an individual. The opinion cites section 6780 of the Florida law (section 20 of the Negotiable Instruments Act) and states that neither in the note nor in the mortgage was the identity of 'any principal disclosed, except the maker of the note, Hanna. The opinion states:

“Aside from the effect of this statutory provision, it is a rule prima facie established that the payee of the note extended the credit to Hanna, the maker of the-note, as there is no other person, corporation, or association designated in the note to whom credit could have been extended. The notes and mortgage in this case were not executed in such a manner as to,bind any other individual, association or corporation than the defendant in so far as is disclosed by either of these instruments or by the declaration. ” Guthrie v. Imbrie, 12 Ore. 182, 6 Pac. 664, 53 Am. Rep. 331, was cited. The opinion pointed out that the court was not required to discuss the question as to whether a plea which disclosed principals known to the plaintiff and hound by the obligations and alleged the joint or separate liability of the principals would have availed defendant.

In other words, this case holds only what the defendant here admits — that the maker is prima facie personally liable, but does not decide whether oral evidence is admissible as between the original parties and those taking with notice. The inference as shown by a specially concurring opinion, is that parol evidence would have been considered admissible. No previous Florida case seems to have been cited.

In Anderson v. Ax, 104 Fla. 294, 139 So. 798, cited, an opinion was filed February 18, 1932. The plaintiff filed suit against Anderson upon his personal promissory note, due one year after date. There was no question arising ont of the representative capacity of the maker of the note, and while Forbes v. Ft. Lauderdale Mercantile Co., 83 Fla. 66, and other cases in which the parol evidence rule was considered, are cited, there was obviously no question arising under section 20 of the Negotiable Instruments Act, and it is not referred to in the opinion.

In Luria v. Bank of Coral Gables, 106 Fla. 175, 142 So. 901, it appeared that the defendant bank, which had become obligated to pay notes executed by one Fowler, undertook to defend by showing an agreement between Fowler and a company that the notes should remain the primary and direct obligation of that corporation. It was held, citing section 6780 of the General Laws of Florida (which is section 20 of the Negotiable Instruments Act):

“Trustees and other fiduciaries may exempt themselves from personal responsibility by using explicit words to show such intention, but, in the absence of such words, they are held bound. Robinson v. Springfield Co., 21 Fla. 203, 224, 225. See, also, Falsten Realty Co. v. Kirksey (Fla.) 137 So. 267.” There was no question of parol evidence considered in the case, and the authority is not inconsistent with the view that the liability of the maker was only prima facie.

The case of Hazlett v. Williams, 76 Fla. 514, which was decided in 1918 after the enactment by the State of Florida of the Negotiable Instruments Act, does not appear to have been cited or considered in this or other cases relied on by plaintiff. There the plaintiff sued upon a promissory note signed:

“W. H. Hazlett, Pres.
A. B. Hazlett, Treas.”

and a declaration was filed upon this note in the statutory form upon the theory that the defendants were personally liable. Pleas were filed denying that the defendant made and delivered the note and averring that it was not their personal obligation but the note and obligation of the Ariel Lumber Co., a corporation, of which plaintiff had notice at the time of the delivery and acceptance of the note. The plaintiff demurred to the pleas and the demurrer was overruled, and testimony in support of the pleas was received upon the trial, which was by jury. The court instructed the jury:

‘ ‘ I further instruct you, gentlemen of the jury, that the Court has ruled that verbal testimony changing the effect of the note in suit is improper, and that you cannot consider any of the verbal testimony .objected to, that tended to show that the note was the note of the Ariel Lumber company and not of A. B. Hazlett and W. II. Hazlett as individuals.”

It was held'that in an action between such parties it was competent to show by extrinsic evidence that the prima facie descriptive words were in fact understood as fixing and intended to determine the character in which the persons using them contracted. The cases of Brunswick-Balke-Collender Co. v. Boutell, 45 Minn. 21, 47 N. W. 261, and Megowan v. Peterson, 173 N. Y. 1, 65 N. E. 738, were cited. The opinion expressly approves of the language of the Hew York court in the Megowan v. Peterson case and of the law there stated, and the judgment for plaintiff was reversed.

Again, in Sample v. Wilson, 101 Fla. 818, 134 So. 549, 139 So. 144, in which an opinion was handed down by the Supreme Court of Florida May 7, 1931, it appeared that Sample had executed his promissory note to Lake Marion Groves Corp., dated April 23, 1925, signed “J. W. Sample, Trustee”; that the corporation indorsed the note to one Arline, who in turn indorsed it to Wilson without recourse; that Wilson claiming to be a holder in due course sued Sample on the note. At the conclusion of the testimony a motion to strike the evidence offered by defendant and to direct a verdict for plaintiff was granted. The court said that the sole question for determination was whether the defendant's evidence affecting the status of Wilson as a holder in due course should have been stricken in the face of an allegation and supporting evidence that he was not such holder; that Wilson contended that if there was an arrangement between Sample and the initial payee that he, Sample, was not to be personally liable for the payment of the note, Wilson knew nothing of such an arrangement before he purchased it and that it was further contended that a promissory note being a “courier without luggage, whose countenance is its passport, ’ ’ the mere addition of the word “agent” or “trustee’ to the name of the obligor without disclosing his principal’s identity does not exempt him from personal liability on the note. Section 6780 (section 20 of the Negotiable Instruments Act) was quoted and relied on. The court stated, however, that while the contention in the abstract was sound in that particular case, the question of whether Wilson was a holder in due course was clearly put at issue and was a fact for the determination of a jury; that “the evidence stricken supports plaintiff in error’s contention that Sample’s representative character was explained to Wilson when Arline indorsed the note to him (Wilson), and that Wilson was also advised of the agreement between Sample and Lake Marion Groves Corporation to the effect that Sample was in no sense bound personally on the note. ’ ’ The opinion says:

“It is also shown that Arline’s endorsement was without recourse, that the note was one of a series, that the interest was past due, and that it was signed J. W. Sample, ‘Trustee.’ If these allegations were true, Wilson was not a holder in due course, as contemplated by law. Section 4725, Revised General Statutes of 1920 (section 6811, Compiled General Laws of 1927.) ” The opinion states that the probative force of this evidence was for the determination of the jury, and that the order striking it and directing a verdict was error; and the order was accordingly reversed.

This case would seem to be on all fours with defendant’s contention as to the construction of section 20. The briefs do not disclose any case in Illinois in which section 20 of the Negotiable Instruments Act has been construed with reference to this question. Some of the opinions relied on were rendered long prior to the enactment of the Negotiable Instruments Law in this State. Some construe contracts not negotiable. Some decided after the enactment of that law do not refer to or consider it. To the first class belong Powers v. Briggs, 79 Ill. 493, decided in 1875; Hypes v. Griffin, 89 Ill. 134, decided in 1878; and Scanlan v. Keith, 102 Ill. 634, decided in 1882. The Scanlan-Keith case is interesting, in that it intimates that even under the older law parol evidence might be admissible for the purpose of showing the intention of the parties.

Plaintiff cites Decowski v. Grabarski, 181 Ill. App. 279, decided in this court in 1913, several years after the enactment of the Negotiable Instruments Law. The note there was signed:

“Albert F. G-rabarski, Pres.
F. J. Tomczak, Secy.”

In a suit upon this note in the municipal court of Chicago, Grabarski and Tomczak filed an affidavit of merits, in which they alleged that they were the president and the secretary, respectively, of a corporation known as “The Bell,” and that the note was the obligation of that corporation and not of the defendants individually. The suit had been begun by confession of judgment, but leave was given to make a defense and the judgment to stand as security. Upon trial by the court there was a finding for the plaintiff and final judgment against the defendants. After quoting at length from Scanlan v. Keith, this court said:

“In McNeil v. Shober & Carqueville Lith. Co., 144 Ill. 238, it was held that where the makers of the note have signed the same, one as president and the other as treasurer, that prima facie it was the note of the individuals, but that it was proper to submit ‘the question of fact to the jury, whether they intended to give their individual note, or to execute a note for and on behalf of the corporation only. ’ ” The opinion also quotes from Thompson v. Hasselman, 131 Ill. App. 257, as to the danger of entrapment of the .unwary by a contrary rule, and stated:

“Applying these general statements to the particular case before us, it may be said that while plaintiff, by the introduction of the note, made a prima facie case against the defendants individually, yet the court' properly permitted the defendants to introduce evidence outside the note to prove the matters of defense set forth in their affidavit of merits.

“We think it is also clear that if the defendants were successful in establishing the facts as claimed in the affidavit of merits, there could be no recovery against them individually.” The judgment was reversed and the cause remanded.

We are cited to Thayden v. Christiansen, 246 Ill. App. 380, but find upon examination that the contract there considered was not negotiable, but on the contrary was a contract of employment.

Herman v. Metropolitan Petroleum Co., 253 Ill. App. 536, decided by the third division of this court in June, 1929, is also cited. It appeared in that case that judgment by confession was taken on a note signed:

“Metropolitan Petroleum Co.

By Israel B. Zimmerman

Nat Rue 1606 W. Roosevelt Road.”

■ An appeal was taken by Rue alone from an order of the trial court, which refused to set aside as against him the judgment entered by confession. The Negotiable Instruments Act was apparently neither cited nor considered, and indeed it was not applicable to the controversy, since it appeared that Hue had signed his own name without any addition from which a supposed representative capacity could be inferred. It is apparent that there was no intention on the part of the court to construe any section of the Negotiable Instruments Act.

Fronck v. Wroblewski, 255 Ill. App. 529, construes section 16 of the Negotiable Instruments Act, Cahill’s St. ch. 98, ¶ 36, not section 20, which we construe here.

In Daniel on Negotiable Instruments, 7th ed., sec. 300, p. 377, the author summarizes the law construing section 20 of the Negotiable Instruments Act on this point and says:

“The decisions interpreting the statute are not in harmony, some courts holding that although the signature is followed by a word indicating representative . capacity, yet, when no obligated principal is disclosed, he cannot escape liability under this law. The weight of authority, however, seems to be that where the trustee has authority, as between the parties or those taking the instrument with notice, it may be shown by parol that the principal for whom the trustee was assuming to act was known. Where the note discloses the name of the principal, as ‘We, the trustees of’ a named church, and is signed by individual names, the signors are not individually liable. So far as innocent purchasers for value are concerned, however, the representative character of the party must be disclosed upon the face of the note.”

Lex loci contractus and lex fori being as indicated in the foregoing, we hold that the oral evidence offered by defendant in this case was admissible; that the court erred in refusing to receive it. Moreover, under the holding in Owens v. Nagel, 334 Ill. 96, the note being payable to Fish as trustee was sufficient to charge the bank with notice that the payee had no right to sell or dispose of the notes except in accordance with the terms of the trust. The burden was on the plaintiff to show it was so transferred to it. The offer gives the names of the persons for whom the trustees acted in executing these notes and who therefore are bound if there is personal liability.

For the reasons indicated the judgment is reversed and the cause remanded.

Reversed and remanded.

O’Connor and McSurely, JJ., concur.


text:
    The National Bank of the Republic of Chicago, Complainant, v. Wells-Jackson Corporation et al., Defendants. George A. McKinlock, Cross Complainant, Appellee, v. The Phillips Company, Cross Defendant, Appellant.
    Gen. No. 36,759.
    Opinion filed December 11, 1933.
    Rehearing denied and opinion slightly modified December 27, 1933.

      Altheimer, Mayer, Woods & Smith, for appellant; Walter B. Smith and William F. Struckmann, of counsel.
    Defrees, Buckingham, Jones & Hoffman, for appellee ; Don Kenneth Jones, of counsel.
   Mr. Presiding Justice Matchett

delivered the opinion of the court.

On September 11, 1930, the National Bank of the Republic, as trustee, filed its bill to foreclose a trust deed given by the Wells-Jackson Corporation to secure an issue of bonds of the aggregate amount of $540,000. The trust deed purported to convey a “certain leasehold estate” which was created by a lease executed by George A. McKinlock, as lessor, to Noel E, Durand and Frederick C. Foltz, as lessees, dated November 10, 1928. The lease was for the term of 99 years and demised certain premises therein described.

On November 20, 1928, the lessees assigned.this 99-year lease to the Wells-Jackson corporation. The bill to foreclose contained the usual allegations as to defaults, etc., and prayed for a foreclosure and for general relief.

' By amendment to the bill filed October 24, 1930, certain unknown owners of bonds secured by another trust deed were made defendants as were B. E. Phillips and E. J. Phillips, copartners doing business as Phillips & Co., and Roscoe Overall Laundry & Supply Co.

On December 14, 1931, George A. McKinlock filed his cross-bill setting up the prior proceedings in the cause, and averring that on November 10, 1928, he was the owner in fee simple of the premises described and since that time continuously has been such owner; that prior to the execution of the trust deed, for which foreclosure is prayed, he made a 99-year lease of the premises to Durand and. Foltz, the term beginning January 1, 1929, and ending December 1, 2027; that the lease was delivered and recorded; that Durand and Foltz on November 30,1928, by a writing of that date assigned the same to the Wells-Jackson Corporation, which assumed all the terms and conditions of the lease; that McKinlock assented to the assignment upon the conditions named; that on January 1,1929, Wells-Jackson Corporation executed the trust deed described in the bill of complaint; that Wells-Jackson Corporation, Durand and Foltz have all defaulted in the payment of rent provided by the lease; that he, McKinlock, served notice that if these defaults continued 60 days he would end the term and take possession of the premises; that the taxes for 1929 were unpaid, and that on June 30, 1931, he declared a forfeiture and demanded possession as provided for by the lease; that the declaration of forfeiture was duly served on July 1, 1931, upon the lessees, the corporation, and the trustees (including complainant) under the two trust deeds; that the Chicago Title & Trust Co. was appointed receiver in the original foreclosure proceeding; that by reason of these defaults all the defendants who claim an interest or right in the premises hold such right or interest, if any, subject to the rights of McKinlock; that on July 14, 1931, McKinlock filed an intervening petition setting up the foregoing facts and praying that he be decreed to be entitled to immediate possession; that all defendants and persons claiming through them in possession of the real estate should be directed to deliver possession to him; that -the parties were ruled to answer, and that on October 3, 1931, a decree was entered adjudging that the declaration of forfeiture of the 99-year lease was valid and binding, subject to any rights which the National Bank of the Republic of Chicago, as trustee, and other parties in interest might possess; that any other parties to the cause or persons claiming under them who might be in possession be directed to deliver possession to McKinlock on October 31, 1931; that pursuant to said decree the premises were on October 31, 1931, delivered up to McKinlock, who is now in possession.

The cross-bill further alleges that the lease, assignment and trust deeds are clouds on McKinlock’s title to the real estate, building and improvements; that Phillips & Co. and certain other parties named have or claim some right, title, interest or lien in the real estate and buildings, and that such lien, if any, has ceased and determined. The cross-bill prayed that the lease, the assignment, the two trust deeds and the interest of these other persons be set aside and declared void as a cloud on McKinlock’s title, and that McKinlock be decreed to be vested with a fee simple title to the real estate, building and improvements, free and clear of the lease, the mortgage trust deeds and all liens upon or attaching to the leasehold estate.

The Phillips Co. answered that it claimed an interest in the premises; that on August 19, 1929, its predecessors, Phillips & Co., then a partnership, entered into a contract of lease with Wells-Jackson Corporation, as lessees, whereby Phillips & Co. agreed to install and lease for five years within its completion and approval a system of automatic fire sprinklers in the property of the leasehold estate described as 316-326 South Wells street, Chicago, Illinois; that the lessee agreed to pay lessors and their assigns an aggregate rental of $45,950, payable annually in advance at the rate of $9,190 annually, with interest at seven per cent; that it was mutually agreed in the contract that the system should not become a fixture but should be and remain personal property, and that the title and right of possession thereto, subject to the terms of the contract, should remain in the lessors, and that if default be made of the payments or other provisions of the lease, the lessors, or their assigns, might resume possession of the system, which the lessee agreed to deliver to them on demand, whether attached to the realty or not, and that the lessors of the system should have the right to enter the premises for the purpose of removing the system, provided, however, that upon full payment of the rental, lessors would then sell and deliver to the lessee the sprinkler equipment absolutely.

The answer further averred that on August 19,1929, Phillips & Co. assigned to the Phillips Co. the lease or contract and all rights thereunder; that about the time of the execution of the lease between McKinlock as lessor and Durand and Foltz as lessees, the Wells-Jackson Corporation was organized, to which the lease and leasehold estate were assigned, as alleged in the cross-bill; that pursuant to said lease a large brick and concrete building was constructed upon the demised premises; that in the plans for the building the lessees and their assigns caused to be incorporated an adequate sprinkler system of proper fire protection; that the plans were known to and examined and approved by McKinlock, and that the fire protection system was the system contracted for between Phillips & Co. and the "Wells-Jackson Corporation under the Phillips lease; that pursuant to the Phillips lease, the Phillips Co. caused to be installed in said building- the fire protection sprinkler system in accordance with the plans, specifications and contract; that the same, upon completion, has remained in the building and has at all times been maintained in good and operative condition; that the instalment thereof was approved by McKinlock; that the Wells-Jackson Corporation has made default in the payment of the instalment of rentals accruing under the Phillips lease on September 10, 1930, and in payments which thereafter have become due by reason of which the Phillips Co. has elected to declare and has declared the sprinkler system instalment to be the property of the Phillips Co., and has demanded from McKinlock that he turn over to the Phillips Co. the sprinkler system, which he has neglected and refused to do; that about November 1,1931, McKinlock took possession of the premises and building and the sprinkler system and has continuously since that time been operating the building as a public garage; that the building has a capacity of upwards of 400 automobiles and has many automobiles continuously stored therein; that McKinlock has knowingly and wrongfully used the system and converted the same to his own use, and that the title thereto and the right to exclusive use and benefit thereof remains in the Phillips Co.

The answer prayed that as a condition to the entry of a decree as prayed by McKinlock, he be required, as a condition precedent thereto, to pay Phillips Co. the full amount of rental due to it under the Phillips lease, with interest.

The cause was heard by the chancellor in open court, and a decree was entered finding jurisdictional facts— that McKinlock, cross complainant, had proceeded according to the statute, that the equities were with him, that the material allegations had been proven and were true, and these were in substance set forth.

The decree further found that the sprinkler system was an integral part of the real estate; that the erection and instalment of it were required by the plans and specifications for the construction of the building; that the building was constructed as a public garage and was required to be a first-class modern fireproof building, erected and constructed in accordance with the laws and ordinances of the City of Chicago, by which the sprinkler system was required "to be erected, installed and maintained therein at all times, otherwise the operation of the building as a garage was forbidden and prohibited by the ordinances; that the persons who contracted to install the sprinkler system had notice of the 99-year lease and the terms thereof and of the plans and specifications for the erection of the building as required by the lease and of the rights and interest of the lessor under the lease and the ordinances ; that the Phillips Co. had no valid claim- for money or compensation from McKinlock; that there was no privity of contract between McKinlock and the Phillips Co. under the contract by virtue of which the sprinkler system was installed; that there was no conversion of the sprinkler system by McKinlock, who had no knowledge or notice of the attempted reservation by the Phillips Co. of title to the system, and that the attempted secret reservation of title thereto under a rental or conditional sales contract was a fraud on McKinlock. After adjudging the rights of other parties, the decree declared:

“That said George A. McKinlock is vested with the fee simple title to said real estate, building and improvements, free and clear of said lease and of the mortgage trust deeds on said leasehold estate, and any and all liens upon or attaching to said leasehold estate and that said lease and trust deeds be delivered up and cancelled by the clerk of this court and that all cross defendants to this cross-bill be barred of all right, title, interest, and right of redemption in and to said leasehold estate and said real estate, building and improvements and that cross complainant recover its costs. ’ ’

The Phillips Co. contends that this decree is erroneous as to it; that its contract with the Wells-Jackson Corporation was valid, and that under that contract the title to the sprinkler system should have been declared to be in the Phillips Co.

The briefs of the parties seem to concede that prior to the enactment of the Uniform Sales Act this contract would have been held to be fraudulent and void as against McKinlock, the owner of the premises. They contend, however, that the former rule has been changed by sections 23-26 of the Sales Act, Cahill’s St. ch. 121a, ¶¶ 26-29 (Smith-Hurd's Ill. Rev. Stats. 1933, ch. 121½, secs. 23-26.) Said section 23 provides in substance that where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, “unless the otoner of the goods is by his conduct precluded from denying the seller’s authority to sell.”

The Phillips Co. contends that under this provision of the statute as construed in Sherer-Gillett Co. v. Long, 318 Ill. 432; Dayton Scale Co. v. General Market House Co., 335 Ill. 342, the title to the sprinkler system remains in the Phillips Co., and that it is not precluded by its conduct from denying the right of the lessee to sell the same to McKinlock. The contract between the Phillips Co. and the Wells-Jackson Corporation provided that the sprinkler system should not become a fixture but should remain the property of the “lessor,” who should have the right in case of default to take possession while the same was attached to the realty or not.

The controlling question in the case therefore is whether the Phillips Co. is by its conduct precluded from claiming this property. Neither of the parties cites any case which is precisely in point, but the facts we have recited and others which appear in the record preclude the Phillips Co., in the opinion of this court, from now claiming the property. The 99-year lease, it will be noted, was recorded on February 4, 1929, and the claimant here is therefore chargeable with notice of all its provisions. The lease provided for the wrecking of the old building and the erection of a new one to be used as a public garage. The parties knew, or are presumed to know, that the city ordinance then in force prohibited the use of any such garage unless it was equipped with a sprinkler system. The lease provided that there should be no liens of any kind against the premises for work or material, and that any lien claimed should attach only to the leasehold estate. The lease further expressly provided that upon its termination all fixtures and improvements should belong to the lessor. The claimant here knew that the new building was to be a garage, knew of the provisions of the city ordinance, knew that the Wells-Jackson Corporation was under covenant to construct the building with a sprinkler system, free and clear of liens of any kind, and that all this was to be done so that the building could be occupied for use as a garage and in accordance with the city ordinance not later than December 31,1931. The claimant also knew the provision of the lease that at the termination thereof the fixtures should belong to the lessor. The Phillips Co. installed its system with knowledge of these restrictions, and by delivering its goods to the Wells-Jackson Corporation enabled it to represent to McKinlock that the building covenants in the lease had been performed. No claim was made by the Phillips Co. upon the owner of the premises until after default had been made in the covenants and conditions of the lease by the Wells-Jackson Corporation. To now permit the Phillips Co. to assert its rights and thus enforce a secret lien against the property would, we hold — and as the decree finds — amount to a fraud upon McKinlock which will not be tolerated by a court of equity.

As this is the controlling question in the case, our decision and conclusion thereon make it unnecessary to discuss other points raised in the briefs. For the reasons indicated, the decree of the trial court is affirmed.

Affirmed.

O’Connor and McSurely, JJ., concur.