text:
    Howard L. Scott et al., Appellees, v. Ethelyn B. Hatch, Appellant.
    Gen. No. 8,910.

      Heard in this court at the February term, 1935.
    Opinion filed May 17, 1935.
    Edwards, Block & Bairstow, of Waukegan, for appellant ; J. E. Bairstow and Sidney H. Block, of counsel.
    R. W. Churchill, of Grayslake, for appellees.
   Mr. Justice Dove

delivered the opinion of the court.

On November 23, 1934, appellees, the plaintiffs below, filed their sworn complaint in the circuit court of Lake county, seeking the reformation of a contract theretofore entered into between plaintiffs and the defendant and her deceased husband, whereby the defendant and her husband agreed to sell and the plaintiffs agreed to buy certain real estate described in the complaint. The relief sought was also the release and cancellation of a certain judgment theretofore rendered against the plaintiffs, which judgment had, on motion of the plaintiffs, theretofore been opened up and leave granted the defendants therein to plead. The complaint also prayed for an order restraining the defendant from the prosecution of the suit at law which was then pending and undetermined. On November 26, 1934, the complaint having been amended, an order was entered directing that a preliminary injunction issue staying the further prosecution of said suit at law until the further order of the court. This order was conditioned upon the plaintiff’s filing a $1,000 bond, with surety to be approved by the clerk. Upon the same day the defendant entered her motion to vacate this order and to dissolve the preliminary injunction. Upon a hearing, this motion was denied and from that order this appeal has been prosecuted.

The complaint as amended alleges that on November 1, 1926, the following written contract was entered into by appellees and Fred L. Hatch and appellant Ethelyn B. Hatch, viz.:

“This agreement, made this first day of November, in the year nineteen hundred and twenty six, between Fred L. Hatch and Ethelyn B. Hatch, his wife, hereinafter called the sellers, and Arthur Gardiner, Howard L. Scott and Nicholas Bobinson, Jr., as tenants in common, hereinafter called the purchasers: Witnesseth, that if the said purchasers shall first make the payments and perform the covenants hereinafter mentioned, on the part of the purchaser to be made and performed, the seller hereby covenants and agrees to convey or cause to be conveyed to the purchaser, in fee simple, as tenants in common, clear of all incumbrances whatever, except as herein noted, by a good and sufficient conveyance, the following described real estate in the County of McHenry and State of Illinois, known and described as: (describing forty acres of land).

“And the purchaser hereby covenants and agrees to pay the seller at the office of the Spring Grove State Bank, Spring Grove, Illinois, or at such other place as the seller shall in writing designate and appoint, the sum of Fourteen Thousand ($14,000.00) Dollars, in the manner following: Twenty five hundred ($2500.00) dollars upon signing of this contract. The balance of eleven thousand five hundred ($11,500.00) dollars to be paid on or before five years from the date hereof. The purchasers have the privilege of paying $500.00, or any multiple thereof at any time. It is further agreed by the respective parties hereto, that when $5000.00 of the purchase price has been paid the said sellers shall then deliver a warranty deed to the purchasers and accept from them a trust deed mortgage for the sum of $9,000.00.

“Said trust deed notes bear interest at the rate of six per cent per annum, payable semi-annually. All payments shall bear interest at the rate of six per cent per annum payable semi-annually, on the whole sum remaining from time to time unpaid, and to pay all taxes thereof falling due after October 12th, 1926.

“And in case of the failure of the purchaser to make either of the payments, or any part thereof, or to perform any of the covenants on the part of the purchaser hereby made and entered into this contract shall, at the option of the seller, be forfeited and determined, and the purchaser shall forfeit all payments made on this contract, and such payments shall be retained by the seller in full satisfaction, and in liquidation of all damages sustained, and the seller shall have the right to re-enter and take possession of the premises aforesaid; or in case of failure of the purchaser to make either of the payments, or any part thereof as herein-above agreed, and in case said default shall continue for the period of sixty days, then the subsequent payments shall be immediately due and payable at the option of the seller. (Then follows a warrant of attorney in the usual form, authorizing a confession of judgment.)

‘ ‘ Title to be shown by abstract of title, or merchantable copy or a guarantee policy or Torrens Certificate of title to date hereof. It is mutually agreed by and between the parties hereto that the time of payment shall be of the essence of this contract; and that the covenants, options, agreements and powers herein contained shall extend to, and be obligatory upon the heirs, executors, administrators, devisees, successors and assigns of the respective parties. It is further agreed that the said second party shall take possession of the above described premises, on the day of execution of this contract, and that they shall not cut down any standing trees or timber during the period of this contract, without the written consent of the first party herein.

“Nicholas Robinson, Jr. (Seal)

Arthur Gardiner (Seal)

Fred L. Hatch (Seal)

Ethelyn B. Hatch (Seal)

Howard L. Scott (Seal) ”

The complaint as amended then alleged that appellees were officers of Fox Lake Golf and Country Club, which maintained its club grounds across the street from the tract described in the foregoing contract, that Ethelyn B. Hatch and Fred L. Hatch knew the officers of the club personally and lived across the road from the club grounds, that the club desired to purchase the land described in the contract and appellees were appointed agents of the club to negotiate the transaction, that Ethelyn B. Hatch and Fred L. Hatch advised appellees that they would sell the tract described in the contract upon the terms therein stated and that appellees informed the owners that the club was willing to purchase upon those terms but was not able to make the initial payment of $2,500. The complaint as amended then recited:

“Whereupon it was agreed by and between the plaintiffs and the said Fred L. Hatch and said Ethelyn B. Hatch, his wife, she acting for herself and also as agent for the said Fred L. Hatch, that if the plaintiffs Howard L. Scott, Arthur Gardiner and Nicholas Robinson, Jr., would advance the said sum of $2500.00 so required for the closing of said transaction, and enter into contract with said Fred L. Hatch and Ethelyn B. Hatch for the purchase of said land, for the price, and on terms as above set forth, that as and for security for the said sum of $2500.00 so advanced to said Club by the plaintiffs, they, the said Fred L. Hatch and Ethelyn B. Hatch would execute the said purchase contract in the name of the plaintiffs as purchasers, and would, on demand, whenever said Fox Lake Golf and Country Club should repay said sum of $2500.00 to the plaintiffs, cancel said contract with the plaintiffs and enter into a new contract of like terms, tenor and effect, but with full credit for such payment, with Fox Lake Golf and Country Club, and would then release the plaintiffs from all liability under such contract.”

The complaint as amended then alleges that acting upon such verbal agreement, appellees afterward executed the contract to purchase said real estate and paid the Hatches the sum of $2,500 as required in the contract; that on March 1, 1927, the club refunded to appellees the $2,500 so advanced by them and appellees thereupon assigned the contract of purchase to the club, which accepted the assignment, but the assignment was not consented to by the Hatches; that on March 27, 1927, appellees caused to be typed on the front of the copy of the contract so retained by them which had been assigned to the club a release of the obligation of appellees and presented the same to the Hatches and requested them “to execute the consent to such assignment, and to execute the release of liability as so typed on the face of such contract, or a release of liability of the plaintiffs under such contract, or to execute to the Fox Lake Golf and Country Club a new contract of like tenor and effect, allowing credit for the payment so made, and to release the plaintiffs from liability under such original contract, all in manner as they, the said Fred L. Hatch and Ethelyn B. Hatch had agreed to do at the time of the execution of such contract, all as above set forth, ’ ’ that the Hatches refused this request but informed the appellees verbally that they would release them from the obligation and look to the club for performance of the contract, that appellees have had nothing further to do with the contract as individuals and did not have any knowledge that the Hatches claimed that appellees were personally bound by the contract until December 12, 1931, when appellant advised them that she expected to procure judgment against them as provided in said contract.

The amended complaint then alleges that on December 14,1931, appellant caused a judgment for $11,963.83 to be entered by confession against appellees, being the amount then due under the provisions of the contract, that after said judgment was entered, it was opened up and leave granted appellees to plead, that pleadings were filed and issues made up and the cause set for trial for November 26,1934, that the defense of appellees in said action is that it was the understanding and agreement of all of the parties when the contract was executed that the appellees were acting not in their individual capacity but as agents for the Country Club, that it was the understanding and agreement of all of the parties, when the contract was executed, that appellees executed it in order to secure them for the initial payment of $2,500 so advanced by them for the use of the club in the purchase of said land, and that the Hatches agreed at the time of the execution of the contract that they would cancel the contract as to appellees whenever the club was prepared to assume such contract and reimburse appellees for such advancement; that said club did assume the obligations of such contract on March 1, 1927, and obligated itself to perform such contract according to its terms and that the Hatches verbally released appellees from all obligation under such contract and although they have been requested to perform such verbal agreements, they have refused so to do.

It is insisted by appellant that the written contract entered into on November 1, 1926, was absolute in its terms and that the rule obtaining both in law and in equity is that parol proof that such a contract is not absolute but conditional is not admissible, that the allegations of the amended complaint are obnoxious to the statute of frauds, that the allegations of the complaint as amended do not disclose that the remedy at law is inadequate, that the appellees are guilty of laches and that the order was erroneous in that it did not require appellees to furnish a proper bond inasmuch as the order did not specify any time within which the bond need be filed.

Counsel for appellees state that it is not contended that there was any mistake in the written contract or in any of its terms or provisions, but that the verbal representations of appellant made prior to the execution of the contract led appellees to act, that her subsequent verbal statements to appellees after the contract had been assigned to the club, to the effect that they were released from all liability thereunder and that she would look entirely to the club for the performance of the contract and her conduct in accepting performance from the club until it made default constitutes a course of conduct which in equity estops appellant from attempting to assert against appellees a breach of said contract, that the enforcement of the contract would result in such a serious fraud upon appellees that a' court of equity will restrain appellant from prosecuting in a court of law an action to recover damages for the breach of the provisions of the original contract, that the doctrine of laches or the statute of frauds does not apply and that this is not a proceeding to enjoin the collection of a judgment and that the order granting the injunction was sufficient even though no time was specified in which the injunction bond was to be filed.

In Lichtstern v. J. Rosenbaum Grain Co., 176 Ill. App. 250, it appeared that an order was entered granting the complainants a temporary injunction upon complainants filing a bond with surety to be approved by the clerk of the circuit court of Cook county, but did not fix the time in which it should be filed. The court in holding the order erroneous in this respect said that the order does not in terms enjoin or restrain the defendants from doing anything, nor does it in terms expressly require the complainant to file the specified bond, nor fix any time within which he may file it. It is therefore entirely optional with him when, if ever, the injunction shall issue. The record in the Lichtstern case did not show, nor does the record in the instant case show, that any injunction bond was ever filed nor any injunction actually issued, and what was said in the Lichtstern case is equally applicable to the instant case as by the terms of the order the court in effect delegated to appellees the power of deciding for themselves whether their need was urgent or otherwise, and placed in their hands the right to use or not to use in their discretion the “strong arm of the court.” In our opinion the order of the court should have required the bond, upon the filing of which the issuance of the preliminary injunction was conditioned, to have been filed within a reasonable time, specifying the time.

The fraud which appellees insist warranted the chancellor in entering the order directing that a preliminary injunction issue is found in the allegations of the complaint, wherein it is averred that prior to the execution of the contract, appellant promised that if appellees would advance the initial payment to her, she would, on demand and upon the repayment to appellees of, said amount by the club, cancel said contract with appellees, release them from all liability thereunder and enter into a new contract with the club, together with the further allegations of her refusal thereafter to do as she agreed, although the club had repaid appellees the initial payment. These averments, insist appellees, when considered in connection with the further allegations that appellant verbally promised appellees that she would release appellees from their contract and look to the club for the performance thereof and that she did thereafter look to the club until the club defaulted and that she thereafter repudiated her promise and began the suit, to enjoin the prosecution of which the instant proceeding was instituted, constitutes such conduct as a court of equity will take cognizance of and hold that appellant is estopped from asserting against appellees a breach of the original contract.

In the early case of Coffing v. Taylor, 16 Ill. 457, it was said that to permit previous oral promises, statements or understandings of the parties to written agreements to be shown would destroy the distinction between verbal and written contracts. In Murphy v. Schnell, 248 Ill. 182, the court said: “Evidence of prior or contemporaneous negotiations leading up to the consummation of a contract or of conversations or declarations at the time it was completed or after-wards, is always rejected.” In Sterling-Midland Coal Co. v. Great Lakes Coal & Coke Co., 334 Ill. 281, it is said: “The rule is too well recognized to require citation of authorities that all preliminary negotiations, whether oral or written, are merged in the written contract. ’ ’

Counsel for appellees concede that in a court of law verbal agreements of the parties at the time of the execution of an instrument in writing, or subsequent thereto may not be received in defense of a suit brought thereon, but insist that in equity the rule is different and in support of this contention cite the cases of Hunter v. Bilyeu, 30 Ill. 228; Dillard v. Jones, 229 Ill. 119, and Catholic Bishop of Chicago v. Chiniquy, 74 Ill. 317. Hunter v. Bilyeu, supra, was a proceeding in equity to reform a contract for the sale of land by causing to be inserted therein certain tracts of land alleged to have been omitted therefrom through mistake. In its opinion the court stated that as a general proposition, the terms of a written agreement cannot be changed by parol; that where parties commit their contracts to writing, the writing forms the only evidence of its terms and all antecedent and contemporaneous verbal agreements are merged in the written contract. The opinion of the court further states that fraud, trusts, accident and mistake are subjects peculiarly proper for the jurisdiction of courts of equity and the jurisdiction of a court of chancery to correct mistakes is no less important to the due administration of justice and the safety of the citizen than the rule of the common law, that parol evidence cannot be received to add to, or vary a written contract, but if a court of equity did not have the power to correct mistakes in a written instrument, great injustice would be perpetrated with impunity and that a court of equity does not transcend its powers in declaring a contract to be as the parties have made it, even though in so doing an entirely new and different contract is made. The court then examined the evidence and held that the alleged mistake was not proven. Dillard v. Jones, supra, was a proceeding to quiet title and correct a mistake in describing a certain tract of land as the same appeared in all the files and decrees entered in a partition proceeding. In its opinion the court stated that the doctrine is elementary that parol evidence is not in general admissible between the parties to vary a written instrument. That it was equally well settled that mistake, fraud, surprise and accident furnish exceptions to this otherwise universal doctrine, and parol evidence in support of these exceptions has been applied many times in the correction of contracts where the mistake was one of fact, mutual and common to all the parties to the instrument and reversed the decree of the lower court and held that the master’s deed in the partition proceedings should be corrected as prayed. Catholic Bishop of Chicago v. Chiniquy, supra, was a proceeding to enjoin an action of ejectment on the ground that the conveyance relied upon by the plaintiff in the ejectment suit was void. The trial court so held and granted a perpetual injunction restraining the prosecution of the ejectment proceeding. In reversing this decree and holding that equity was without jurisdiction, the court stated that the indispensable basis upon which a defendant to an action at law may resort to a court of equity to restrain the prosecution of such action, is, that he has some equitable defense which a court of law cannot take cognizance of either by reason of want of jurisdiction, or from the infirmity of legal process. The application to equity necessarily concedes the legal right, and it is upon the ground that such legal right which is sought to be enforced by the action at law is subservient to an equitable claim, which the defendant at law cannot set up there, that the court takes jurisdiction. It is not upon the ground of want of legal right in the plaintiff at law that equity interferes, but upon the principle of preventing a legal right from being enforced in an inequitable manner or for an inequitable purpose. Equities calling for its interference as clear as the legal right which it seeks to control, must be shown before a court of chancery should interfere with an action at law. The opinion then states that the deed under which appellant claims was of record, but appellees insist that it was never delivered or accepted so as to become operative, or if it were, it was obtained by threats and duress and in either case it is void. “Was not this a denial of his legal right,” inquires the court, “and were not these fit questions to be determined in a court of law? Most clearly they were. If appellant had not title, for the reason that the deed relied on as vesting him with legal title was absolutely void, that would seem to be conclusive of the whole case. That defense was clearly available at law where plaintiff at law had a right to have it tried. ’ ’

As stated in these cases, fraud, accident, and mistake are well known grounds for equitable intervention and for the reformation and cancellation of written instruments. The allegations of this complaint do not state that these oral promises of appellant were not unincorporated in the contract by mistake or that they were omitted through inadvertence, but the allegations are that the very contract the parties thereto intended to execute in every particular was executed. These verbal agreements set up a state of affairs entirely different from the plain words of the written instrument. Appellees so concede, but insist that when a person, by his words or conduct, voluntarily causes another to believe in the existence of a certain state of things, and induces him to act upon that belief, so as to change his previous position, he will be estopped to aver against the latter a different state of things. This is the doctrine of estoppel and the essential element is fraud. People v. Brown, 67 Ill. 435. This doctrine is invoked to prevent injustice or a fraudulent result. Zurich General Accident & Liability Ins. Co. v. Industrial Commission, 325 Ill. 452; First Lutheran Church of Pontiac v. Rooks Creek Evangelical Lutheran Church, 316 Ill. 196; Sherer-Gillett Co. v. Long, 318 Ill. 432; Brown v. Burke, 155 Ill. App. 249; Commercial Union Assurance Co. v. Scammon, 133 Ill. 627; Milligan v. Miller, 253 Ill. 511; Siegel, Cooper & Co. v. Colby, 176 Ill. 210; Bondy v. Samuels, 333 Ill. 535.

In People v. Brown, supra, the doctrine of estoppel by words or conduct is defined and the opinion then proceeds: 1 ‘ Text writers denominate this estoppel by conduct, in order to which all of the following elements must be present: 1. There must have been a representation concerning material facts. 2. The representation must have been made with knowledge of the facts. 3. The party to whom it was made must have been ignorant of the truth of the matter. 4. It must have been made with the intention it should be acted upon. 5. It must have been acted upon. In this connection, it is said, the representation here spoken of is one external to, and not necessarily implied in, the transaction itself, and fraud, or soihething tantamount thereto, is now the distinctive character of this kind of estoppel. Bigelow on Estoppel, introduction, p. 60.”

In the instant complaint it is not alleged that appellant made any misrepresentation of material facts with a purpose to deceive nor is there any allegation that appellees by anything that appellant said or did changed their position in reliance upon the representation or conduct of appellant. The complaint alleges that appellees bought this land in 1926 and the club, started paying interest and taxes. In March, 1927, the contract was assigned by appellees to the club and the club continued to pay as it had done before the assignment. It was not until May 27, 1927, according to the allegations of the complaint, that appellees requested their release from the contract and was given an oral one by appellant. Counsel for appellees say that appellees, relying upon this oral release, made no effort to protect themselves against falling prices of real estate and therefore their position was changed. The complaint does not so state and in our opinion the doctrine of equitable estoppel has no application to the facts involved in the instant case. The contention of appellees is that appellant orally agreed after the contract was executed to release appellants from its binding obligation and that as she now refuses to do so, a fraud is perpetrated upon appellees. This promise relates to the purchase by appellees of the lands described in the contract, and relates to an interest in lands and the statute of frauds is applicable. Baker v. Zang, 275 Ill. App. 146; McGinnis v. Fernandes, 126 Ill. 228; Wheeler v. Frankenthal & Bro., 78 Ill. 124; Morris v. Calumet & Chicago Canal & Dock Co., 91 Ill. App. 436. “The moral wrong of refusing to be bound by a verbal agreement because it does not comply with the statute (of frauds) does not authorize the application of the doctrine of equitable estoppel.” Kelly v. Fischer, 263 Ill. 184.

The order appealed from is reversed and this cause is remanded to the circuit court of Lake county with directions to vacate the order directing the issuance of a temporary injunction and if the bond has been filed and the temporary injunction has been issued to dissolve the temporary injunction.

Order reversed and cause remanded with directions.


source: Caselaw Access Project

author: Mr. Justice Huffman

license: Public Domain

text:
    Village of Lombard, Appellee, v. Andrew C. Anderson and Glens Falls Indemnity Company, Appellants.
    Gen. No. 8,885.

      Heard in this court at the February term, 1935.
    Opinion filed May 17, 1935.
    Thomas A. Matthews and Palmer, Strawn & Mitchell, all of Chicago, for appellants; Thomas A. Matthews, of counsel.
    John E. McCoy, of Lombard, for appellee; Richard T. Tobin, of Chicago, of counsel.
   Mr. Justice Huffman

delivered the opinion of the court.

This was an action brought by appellee to recover against a village collector and his surety for money alleged to have been collected by such collector and not turned over to appellee. The cause was heard by the trial court without a jury, upon a stipulation of facts and testimony presented. No controversy exists over the amount claimed due by appellee from the said Anderson. The questions before this court in this appeal concern three credits to which Anderson claimed he was entitled as against the amount due from him to appellee. The total claimed due by appellee was the sum of $4,072.36. The credits claimed by Anderson were for the following amounts and items: The sum of $1,238.80 was claimed as additional compensation by Anderson as collector of said village, by force and effect of the statute. This claim arose in the following manner: Anderson was appointed by the village board as villag’e collector. He qualified and took office in May, 1931, served for a period of one year, whereupon he was reappointed and qualified and continued to serve until August 15, 1932. The salary of the collector was fixed by the village board at $200 per month. The aggregate amount of salary as above fixed, paid to Anderson during his tenure of office, was $3,080. He claimed that by virtue of Cahill’s St. ch. 53, H 52 (sec. 57, ch. 53, Smith-Hurd) he was entitled to two per cent of all money collected by him. Two per cent of the amount collected by him during his tenure of office would have amounted to $4,318.80, thus making a difference in the compensation received by him and that now claimed by him of $1,238.80.

The above section referred to reads as follows: “Collectors in cities or incorporated towns, in counties of the first and second classes, shall receive such fees as may be prescribed by the common council or board of trustees of their respective cities or incorporated towns, not exceeding in any case two per cent of the amount collected by them.” Appellant urges that by virtue of the above section he is entitled to receive two per cent of the total amount collected, and that any ordinance of the village board attempting to fix any other salary for the office of collector was void. Appellee contends that the above section expressly provides that collectors shall receive such compensation as may be prescribed by the common council or board of trustees of the village, so long as the same does not exceed two per cent of the amount collected. From an examination of the above section, we are not of the opinion that it is the intent thereof that the compensation to be received by a village collector shall be two per cent of the amount collected by him; but it may be any compensation fixed by the board of trustees so long as the same does not exceed two per cent. The two per cent portion of the section only serves to fix the maximum amount that may be allowed. Pars. 89 and 198, ch. 24, Cahill’s St. 1933, of the Cities and Villages Act, provides for the fixing of compensation for certain city and village officers including collectors, and therein contemplates that compensation for their services shall be fixed by the city or village board, except when the same is otherwise fixed by law. We are of the opinion that the village board not only possessed the power to fix the compensation of its collector, so long as the same did not exceed two per cent of the amount collected, but that the conduct of Anderson and his acceptance of his monthly pay without objection during his entire period of service, would estop him from claiming any additional salary at this time. The trial court denied the claim of Anderson for $1,238.80 additional compensation. We are of the opinion that the judgment of the trial court in this respect was correct.

The next credit claimed due by Anderson was the sum of $1,500, and was based upon the following state of facts: On December 17, 1931, Anderson issued and delivered to Ernest A. Logan, treasurer of the village of Lombard, a check for $1,500, drawn upon the Lombard State Bank of Lombard, Illinois. Mr. Logan was cashier of the South Lombard Trust and Savings Bank of Lombard, Illinois. Anderson delivered this check to Mr. Logan at the South Lombard Trust and Savings Bank. Logan deposited the same therein to his account as treasurer of said village. The South Lombard Trust and Savings Bank forwarded the check to the First National Bank of Chicago, which bank was the correspondent bank for the Trust and Savings Bank. The evidence shows that it was an established custom and usage of the Trust and Savings Bank to send its checks to the First National Bank of Chicago, for clearance. Before the check cleared, the Lombard State Bank upon which it was drawn, suspended business. This occurred on December 19, 1931, being the second day after the delivery of the check by Anderson to Logan.

It is urged.by appellants that the duty rested upon Logan to promptly present the check for payment to the bank upon which it was drawn, and that his attempt to clear the same through a correspondent bank in Chicago constituted such lack of diligence in the presentment thereof as to discharge Anderson from any liability thereon. It is generally held that if the bank upon which a check is drawn and the holder are in the same place, the payee has until the close of the next business day in which to present the check for payment. In the absence of special circumstances, if he fails to present the check for payment before the close of the next business day after receiving it, the drawer is discharged to the extent of loss caused by the bank’s insolvency. Appellants in this connection rely upon Cahill’s St. ch. 98, IT 207 (sec. 207, ch. 98, Smith-Hurd St. 1933). This section of the Negotiable Instruments Act reads as follows: “A check must be presented for payment within a reasonable time after its issue, and notice of dishonor given to the drawer as provided for in the case of bills of exchange, or the drawer, will be discharged froin liability thereon to the extent of the loss caused by the delay. ’ ’ Par. 215 of the same act, in defining what is a reasonable time, reads as follows: “In determining what is a ‘reasonable time’ or an ‘unreasonable time,’ regard is to be had to the nature of the instrument, the usage of trade or business (if any), with respect to such instruments, and the facts of the particular case.”

The village of Lombard lies only a short distance from Chicago, which city is the financial center of that area. These two cities are situated in adjoining counties. In defining what is a reasonable time, the statute provides that regard is to be had to the nature of the instrument, the usage of the trade or business, and the facts of the particular case. It is thus apparent that it is not the intent or purpose of the statute to lay down a hard and fixed rule as to the number of hours or days which shall constitute a reasonable time. Bank transactions today in the modern age of business are not cash transactions, but merely the shifting of credit balances by means of bookkeeping entries. This takes place by the medium of checks and other evidences of credit.

The evidence in this case shows that it was the established custom of the South Lombard Trust and Savings Bank to clear its checks in Chicago. The depositing of checks in banks to the credit of the holder thereof, and the clearing of same through the usual commercial methods, are transactions peculiar to the banking business and should be recognized and dealt with according to the established usage of that business. The vast number of checks that are received by banks daily from their customers in the ordinary course of business, and which are drawn upon other banks, necessitates some reasonable, fixed, and established custom and usage for the presentment of such checks by and through a known method or agency. The method of clearing checks through an established clearing house conveniently located to the adjacent territory has become an established custom in the banking business, and this usage of trade and business has by necessity of things become incorporated into the banking business of the country. It is apparent that if banks and commercial enterprises were required upon receipt of a check, to immediately search out the bank upon which it was drawn and there demand payment in cash, in order that the cash might be transported to the bank where the check had been deposited for credit, would result in utter confusion. There is no claim that Logan or the South Lombard Trust and Savings Bank had any knowledge or reason to believe that the drawee bank, the Lombard State, was in bad financial condition. The reason for requiring checks to be presented for payment within a reasonable time after their issue, is that a check is not designed for circulation as a medium of exchange, and should therefore, be presented with dispatch and diligence consistent with the attending circumstances. The statute does not lay down an unbending or inflexible rule governing the time of presentment of checks in order to charge the drawer thereof with liability. The only rule is that they must be presented for payment within a reasonable time after their issue. What would be due diligence and a reasonable time under one set of facts, might be negligence under different circumstances, and we are of the opinion that all that can be definitely stated is that every case must in this particular, be decided upon its own peculiar, facts.

The Negotiable Instruments Act requires that a check be presented within a reasonable time, and provides that in determining what is a reasonable time, regard shall be had to the nature of the instrument, the usage of the trade or business, and the facts of the particular case. In this case, Anderson delivered the check to Logan at the bank where Logan was cashier and where he carried his account as city treasurer. Logan deposited the check to his account as treasurer, and pursuant to the established custom of the South Lombard Trust and Savings Bank, the check was forwarded to the First National Bank of Chicago for clearance by it through the clearing house. There is no proof of any undue delay in the steps taken to clear the check. The two cities were but a few miles apart. The drawee bank suspended business on the second day after the check issued. We are of the opinion that the above facts do not constitute such negligence as to give rise to the application of said section 207 of the act, and do not of themselves give rise to a presumption of law that the loss was due to unreasonable delay in presenting the check for payment.

A like question presented under very similar facts, will be found in the case of Johannsen v. Evans, 271 Ill. App. 372. In that case the banks in question were both located in the City of Chicago, while in this case the bank in question is located a few miles outside the limits of Cook county. In the above cited case, the check was drawn upon the West Englewood Bank and deposited by the holder thereof to his account in the Bowmansville Bank. This bank was not a member of the clearing house, and in accordance with its established custom, it forwarded the check to its correspondent bank, the Republic Bank, in Chicago, which bank did belong to the clearing house and took care of the clearance of checks for the Bowmansville Bank. In the case now before us the South Lombard Trust and Savings Bank, not belonging to the clearing house, forwarded the check to its Chicago correspondent, which did belong to the clearing house and which cleared the checks for the country bank.

We are of the opinion that the term, “within a reasonable time,” means a presentment within a reasonable time having regard to the usual and customary manner of conducting the business in question and its established usage with reference to the acts done; and in the absence of evidence to establish the fact that such acts were negligent, that a reasonable interpretation should be given this provision of the act. We are of the opinion that the trial court was justified in finding for the appellee and against the appellants upon their credit claimed because of the said $1,500 check, and that the judgment of the court in this respect was correct.

The third and last credit claimed by Anderson was the sum of $410, which he claimed to have paid to Logan by way of check dated November 7, 1932. This check was drawn upon the South Lombard Trust and Savings Bank, where Logan was cashier, and where Anderson then carried his account as collector, the Lombard State Bank having failed as above noted. This check was given almost three months after Anderson had ceased to serve as collector of the village of Lombard, and after his successor had been appointed and qualified. He obtained no receipt from Logan for the payment of this money. He did not have the canceled check, nor did he obtain or produce the statement of his account at the South Lombard Trust and Savings Bank. A statement was introduced in evidence by appellee showing the account of the village of Lombard at the South Lombard Trust and Savings Bank, during the period of time the $410 check is claimed to have been issued. No such item appears in the statement of the transactions occurring during such period of time. It was stipulated between the parties that Anderson’s services ceased as collector on August 15, 1932. The burden was upon Anderson to establish this credit claimed by virtue of the $410 check. There is no proof that this amount ever reached the village treasurer, and the trial court erred in allowing Anderson credit for the amount of this check.

The judgment of the trial court against appellants is affirmed, in all respects except as to the above credit of $410, which .was allowed appellants. In this respect the judgment of the trial court is reversed and this cause remanded with directions that the trial court shall add to its judgment as heretofore entered, the sum of $410, together with interest thereon in the manner allowed upon the judgment rendered.

Judgment affirmed in part, and reversed in part, and remanded with directions.


author: Mr. Presiding Justice Friend

text:
    Walter Brazowski, Jr., by Walter Brazowski, His Next Friend, Appellee, v. Chicago Title and Trust Company, Appellant.
    Gen. No. 37,592.

      Heard in the second division of this court for the first district at the October term, 1934.
    Opinion filed May 24, 1935.
    George Gillette, Edmund J. Reynolds and Cassels, Potter & Bentley, all of Chicago, for appellant; Ralph F. Potter, Leslie H. Vogel and E. Douglas Schwantes, all of Chicago, of counsel.
    James J. Trainor and Harold T. Halfpenny, both of Chicago, for appellee; James E. McGrath, Frank A. McCarthy and Richard F. Hahn, all of Chicago, of counsel.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

Plaintiff brought an action of tort in the circuit court to recover damages for personal injuries sustained by him. Trial was had by jury, resulting in a verdict and judgment for $4,500, from which defendant prosecutes this appeal.

The essential facts disclose that July 15,1929, plaintiff, then 3% years old, was sitting on the cement foundation located on property known as 1612 S. Prairie avenue, in Chicago, leaning against an iron fence, about four feet high, constructed in front of said premises, running parallel with the public sidewalk. In an effort to arise to a standing position he leaned back against the fence and it fell upon him, causing a fracture of the left femur which ultimately resulted in a slight shortening of his leg. The property was owned by C. Oscar Carlson, Fred S. Kahn, Emanuel Friend and Alexander Friend. In November, 1922, they executed a declaration of trust designating the Chicago Title & Trust Company, as trustee, under a form of trust known as “F-99,” which provided in effect that the trust company was about to take title to the property in question and to hold the same for the ultimate use and benefit of the individuals named therein, as beneficiaries, according to their respective interests as set forth in the instrument, and the trustee was to receive for its services nominal compensation for accepting the trust and taking title. The trust indenture contains the following material provisions:

“It is Agreed and Understood between the parties hereto, (Declarant and Beneficiaries) and by any person or persons who may become entitled to any interest under this Trust, that the interest of any beneficiary hereunder shall consist solely of a power of direction to deal with the title to said property and the right to receive the proceeds from rentals or from sales of said premises, and that such right in the avails of said property shall he deemed to be personal property, and may be assigned and transferred as such; that in case of the death of any beneficiary hereunder during the existence of this trust, his or her right and interest hereunder shall pass to his or her executor or administrator, and not to his or her heirs at law; and that no beneficiary hereunder at any time shall have any right, title or interest in or to any portion of said real estate as such, but only an interest in the proceeds as aforesaid; it being the intention of this instrument to vest the full legal and equitable title to said premises in said trustee. ... It shall not be the duty of the purchaser of any part of said premises to see to the application of the purchase money paid therefor; nor shall anyone who may deal with said trustee be privileged or required to inquire into the necessity or expediency of any act of said trustee, or of the provisions of this instrument . . . while the Chicago Title & Trust Company is the sole owner of the real estate referred to herein, and, so far as the public is concerned has full power to deal with it.”
“The beneficiary or beneficiaries hereunder shall have the management and control of said property, and of the selling, renting, and handling thereof, and any beneficiary or his agent, shall handle the rents thereof and the proceeds of any sales of said property and said trustee shall not be called upon to do anything in the management or control of said property, payment of taxes, assessments, insurance, litigation or otherwise, except on the written direction of the beneficiaries hereunder, and after payment to it of all money necessary to carry out said instructions.”

For several years after the declaration of said trust, defendant made leases and collected the rents for the premises, but March 1, 1927, it delivered the balance then on hand to Alex Friend & Company, Inc., and thereafter the latter made leases, collected the rents and made snch repairs as were required. The property was improved with an old residence which had been occupied by one Mildred M. Cordon since 1927. On February 18, 1929, Mrs. Cordon executed a new lease for said residence with Alex Friend & Company, Inc., Agents, wherein the demised premises were described as “the three-story brick building located at sixteen hundred and twelve (1612) Prairie Avenue (but not including the two-story and brick barn at rear of said premises) to be occupied for private residence . . . from the 1st day of May, A. D. 1929 until the 30th day of April, A. D. 1931.” The lease provided that the tenant had examined and knew the condition of the premises, and had received the same in good order and repair, and would so keep the same ; that the lessor should not be obliged to incur any expense whatever for repairing any improvements upon said demised premises or connected therewith, and that the lessee at her own expense would keep all improvements in good repair and would, so far as possible, keep the same from falling temporarily out of repair. In April, 1929, after the execution of the lease, but before its term commenced, and while Mrs. Cordon, the tenant, occupied the premises, that section of the fence which fell in July, 1929, when the accident occurred, was knocked down by boys in the presence of the tenant, who drove them away and wired the section back in place. Mrs. Cordon also had the fence painted. The record discloses that a barn was situated upon the rear of the premises, but evidence is lacking to show whether it was occupied or how access was had thereto. A photograph in evidence discloses an iron fence in front of the demised premises, erected in three sections, with two open spaces for access to the premises, one immediately in front of the stairway leading to the front entrance of the residence, and the other leading to a cement walk along the side of the house. A small portion of the barn is visible in the rear, but the fence evidently did not extend along the side of the property back to the barn.

Defendant insists that the trustee is not liable because it had neither the right to use, nor the actual possession and control of the premises upon which the injury occurred in July, 1929. The declaration charged that defendant then had possession of the property, and to support this allegation plaintiff seeks, by a construction of the trust deed, to show that the trustee was in possession and that it was actually managing the property through Alex Friend & Company, Inc., as its agent. With reference to these contentions it is urged that certain portions of the two paragraphs of the trust instrument hereinbefore quoted are ambiguous and inconsistent; that the first paragraph excludes the beneficiaries from any right or power to control or manage the property, vests the trustee with full legal and equitable title as owner, so far as the public is concerned, and provides that the only interest of the beneficiaries is their rig*ht to share in the income and direct a sale of the fee; that the later paragraph is inconsistent with the former, in that it vests the beneficiaries with the management and control of the property and the selling, renting and handling thereof; and that, unless the later provision can be reconciled with the former, it must as a matter of law be declared void and of no effect. Thus, by seeking to eliminate the later paragraph on the ground of inconsistency and repugnancy, plaintiff would have the court hold that only the former remains, and then to construe the remaining provisions in such manner as to constitute the beneficiaries as agents for the trustee to manage and control the property and “to appoint other agents” for the same purpose. We think the trust agreement, as shown by the analysis thereof made by defendant, is not subject to any such construction, and for the following reasons:

It is obvious, of course, that the settlors, and not the' trustee, created the trust, and therefore any rights or powers given or reserved over the res, either to the trustee or to the beneficiaries, emanated from and were created by the settlors, who were free to mold it according to their desires within legal limitations.,," (Equitable Trust Co. v. Fisher, 106 Ill. 189, 195; Irish v. Antioch College, 126 Ill. 474, 482.)

In pursuance of their rights, the beneficiaries vested the trustee in its fiduciary capacity with the sale, ownership of, and the legal and equitable title to, the real estate in question, to be held “for the ultimate use and benefit of the” beneficiaries. Then they provided that the trustee be required, on the written direction of the beneficiaries, “to make deeds for, or otherwise deal with, the title to real estate,” but exempted it from entering into “any personal obligation or liability in dealing with said land, ’ ’ and from performing* certain specific functions, by providing that it “shall not be called upon to do anything in the management or control of said property, payment of taxes, assessments, insurance, litigation or otherwise, except on the written direction of the beneficiaries . . . and after the payment to it of all moneys necessary to carry out said instructions.”

The beneficiaries, on the other hand, while given no “right, title or interest in or to any portion of the real estate, as such,” reserved to themselves the proceeds and avails of said property and the right to direct the trustee “to make deeds for, or otherwise deal with the title,” provided “the trustee shall not be required to enter into any personal obligation or liability, ’ ’ and the beneficiaries are by said trust indenture declared to be entitled to and expressly given “the management and control of said property and of the selling, renting and handling thereof.”

Thus, the rights and interest in the property, as well as the powers conferred both upon the trustee and the beneficiaries, and those reserved to them respectively, are all derived from the same source, and no distinction can fairly be made between any one of the rights possessed by the beneficiaries and any of the other rights reserved to them, as a basis for the claim that, in the exercise of the one, they are acting in their own right and not as agents for the trustee, while, in the exercise of the other, they are acting under delegated authority from the trustee. Therefore, it cannot fairly be urged that the beneficiaries’ right to direct the trustee to make deeds, receive rents and the proceeds from sales of the property, were derived from the trustee, and that in exercising them they are merely the agents of the trustee. These rights and powers were created by the settlors under the terms of the trust indenture, and that being true as to certain rights and powers therein conferred, it must be true as to all rights, including the management, control and handling of the property and the sale and rental thereof in their own right, and not as agents of the trustee, but as principals. Stated more concisely, there are two donees of powers, both created by the donors: (1) The trustee, in respect to the powers to be exercised by it, which it holds in trust; and (2), the beneficiaries, in respect to powers to be exercised by them which they hold not in trust, but in their own right and for their exclusive benefit.

It is therefore apparent that there was no intention to vest in the trustee the power of management and control, except in favor of persons dealing with the trustee, and nothing appears in the agreement upon which to base the claim of a contractual relationship of principal and agent as between the trustee and the beneficiaries. Any such construction would make the beneficiaries subject to the direction and control of the trustee, and instead of exercising their own judgment as they clearly have the right to do, as creators of the trust and by its terms, their acts relating to the management and control of the property would at all times be subject to the direction of their principal, the trustee. Manifestly, no such interpretation can be given to the language employed and the intent of the trust agreement as therein expressed.

The provision in the trust deed that the trustee is “the sole owner of the real estate referred to . . . and, so far as the public is concerned, has full power to deal with it, ’ ’ is clearly designed for the protection of persons acquiring rights in the property by dealing with the trustee, and it is not here contended that plaintiff ever had any dealing1 whatsoever with the trustee.

The form of trust created is a convenient method of taking title under tenancies in common, to avoid complications that may arise through the death or disability of one or more of the cotenants and by reason of dower interests. While it is intended that the powers of the trustee should be as broad as possible, in order.to permit the free handling of the title and to afford the maximum protection to persons dealing with the trustee, the settlors have, nevertheless, by the terms of the trust, prescribed and limited the right of the trustee to exercise those powers, and in respect to the power to manage and control the property and the selling, handling and renting thereof, have expressly conferred such powers upon the beneficiaries themselves. Therefore, to say that the powers so conferred upon the beneficiaries in their own right, and which they are privileged to exercise free from control or interference on the part of the trustee, are mere delegated powers from the trustee, is to place an interpretation upon the instrument which is contrary to reason and not supported by any authority cited. Such interpretation would create a relationship between the parties contrary to their expressed intention, and would lead to serious results, never contemplated by them.

In Gallagher Speck v. Chicago Title & Trust Co., 238 Ill. App. 39, the same form of trust indenture was considered and construed by the court. A judgment had been rendered against Chicago Title & Trust Company for work and labor done, and materials furnished, in installing a steam heating plant in the premises, title of record to which stood in the name of defendant, as trustee, and the work was done under a contract consisting of a written proposal made by plaintiff to E. J. Kelley and an acceptance thereof by him. Plaintiff had dealt only with Kelley, and not with the trustee. In the course of its opinion, the court carefully analyzed the rights, liabilities and duties of the trustee and beneficiary under the form of trust indenture employed, and quoted from portions of the provisions of the trust agreement which are identical with those in the instant case. The contention was there likewise made that the relation of principal and agent was created by the terms of the trust between the trustee and Kelley, but the court refused to place such construction on the trust agreement, and said that if it were possible to construe any relationship of principal and agent from the language used in the document, Kelley would be the principal and the trustee the agent, instead of the reverse as claimed by plaintiff. It was further urged that by the terms of the agreement Kelley was in writing appointed the authorized representative or manager of defendant. The court referred to this as a ‘1 misconception, ’ ’ and said that the agreement provided that the beneficiary should have the management and control of the property and of the selling, renting and handling thereof, but that it did not say that the beneficiary should manage and control the property and collect the rents “for the defendant, or as its agent, and there is nothing in the language of the trust agreement which can be so construed,” and that Kelley’s authority to manage and control the property and collect and retain the rents and proceeds of the same was not derived from any appointment by defendant, but that such “rents, avails and proceeds ’ ’ were his own property, reserved to him in and by the terms of the deed to defendant as well as in the trust agreement executed at the time.

Another case precisely in point is Whittaker v. Central Trust Co., 270 Ill. App. 614 (Abst.), where the same form of' trust agreement was under consideration. This was an action for personal injuries, brought by plaintiff against Central Trust Company, trustee, charged with the “management, control, selling, renting and handling” of the property upon which plaintiff was injured. After quoting from that portion of the trust agreement which provides that the management and control of the property shall remain with the beneficiaries, and that the trustee shall not be called upon to do anything in that connection, the court concluded as follows:

“We find nothing* in the record to indicate that the defendant, Central Trust Company of Illinois, had the possession of, or the right of the possession to, or any control over, the property in question, from which it can be held that a duty was impressed upon the Central Trust Company of Illinois with regard to the matter upon which the charge of negligence herein is based.”

Other jurisdictions have upheld the validity of similar instruments vesting title to real estate in one person and the right to possession in another. In Eisenbrey v. Pennsylvania Co., 141 Pa. St. 566, the title to the real estate was in the Pennsylvania Co. as trustee, and the right of possession in Sarah R. Bull. There was a door in a fence which, when opened, encroached on the public sidewalk. The door was suddenly thrown open, injuring plaintiff, who obtained a judgment against the trustee. The Supreme Court of Pennsylvania held that “there are some propositions so self-evident that no strength can be added by elaboration or illustration. That the company, being a mere trustee, not in the occupancy of the property even by a tenant, and exercising no control whatever over it, can be held responsible in damages for this injury, is a proposition the mere statement of which carries with it its own convincing refutation. . . . Were we to sustain the doctrine now contended for by the appellee, it is within the bounds of reason to say that no one could safely act as a trustee in Pennsylvania. Judgment reversed.” To the same effect, 1 Perry on Trusts , (7th ed.) section 329.

Aside from the construction soug’ht by plaintiff to show possession and control of the property by the trustee, it is urged that Alex Friend & Company, Inc., were actually its agents, and our attention is called to the fact that Chicago Title & Trust Company made leases and collected rents during a portion of the period between 1922 and 1927. The evidence does not show definitely when it commenced to collect rents, but the net income from such rents as were collected during this period were turned over to Alex Friend & Company, Inc. This was evidently done at the direction of the beneficiaries, because H. W. Cooley, an employee of Chicago Title & Trust Company, testified, without contradiction, that Alex Friend & Company, Inc., were never employed by Chicago Title & Trust Company to do anything in connection with this property. We find no evidence that the trustee ever exercised any management or control over the property, other than the signing of leases and the collection of rents during the early period of the trust arrangement, and, of course, it could properly have done these things under the- direction of the beneficiaries, who had the right to change the arrangement whenever it suited their purpose. They evidently exercised that right on March 1, 1927, for on that date the trustee delivered the balance of moneys on hand to Alex Friend & Company, Inc., and thereafter signed no leases and collected no rents. Its activities ceased in 1927, more than two years before the accident. The argument “that the beneficiaries were, by appointment, the agents of the Chicago Title & Trust Co., and that said company had the power to appoint other agents at its discretion, and the evidence shows that it exercised that power, by appointing Alex Friend & Company, Inc., its agent,” is not borne out by the evidence, nor by any logical process of reasoning. We therefore conclude that the trustee, at the time of the accident, had neither the right to, nor the actual possession or control of the premises, upon which the injury occurred. It is a fundamental rule that the liability to pay damages for negligence arises out of the existence of a duty and a breach thereof. (Johanson v. Johnston Printing Co., 263 Ill. 236, 239.) The duty in the case at bar would, of necessity, arise out of the fact of possession and control, and can be attributed only to the person who has the possession and control.

Plaintiff also takes the position that the fence in question was used in common by the tenants and that the landlord was therefore in duty bound to maintain it in a state of repair. There is no evidence that there were tenants other than Mildred G-ordon, however. The only other improvement on the property, besides the residence, was a garage in the rear, and there is no evidence to show whether it was occupied or how1 access was had thereto or that the fence was used by any other tenant. Moreover, defendant was not the landlord at the time of the accident, and therefore had no duty to keep the premises in repair. The cases relied upon on this branch of the case, to the effect that a landlord owes a duty to keep in repair premises used in common by several tenants, have no application to the case at bar, because facts are lacking upon which the proposition can be based.

Finally, it is urged that the fence was in a dangerous and defective condition when the lease to Mildred Gordon was made, constituting a nuisance at the time of the letting, and that the landlord, and not the tenant, thereby became liable for the injury, reg'ardless of the obligation of the tenant under the lease to make repairs. There are several reasons why plaintiff cannot avail himself of this doctrine. The only date mentioned in the declaration is July 15, 1929, the date of the accident. There is no charge that the defective condition arose or existed prior to that date, and upon the authority of Marcovitz v. Hergetwether, 302 Ill. 162, “in order to charge owners of leased premises with responsibility for the existence of the alleged defect, ... it was necessary for plaintiff to allege and prove that the conditions complained of existed at the time of the letting or that the owners had covenanted to repair or to remedy the condition or nuisance complained of. ’ ’ The court laid down the general rule in that case that the lessee or occupant, and not the owner as such, is responsible for injuries received in consequence of a failure to keep the occupied premises in repair, no matter whether the condition complained of is the result of misfeasance, malfeasance or nonfeasance, as charged in the case. As applicable to the particular point, the court said: “The declaration contains but one date, March 4, 1919, and the allegations are that all of the conditions and all the happenings mentioned in the declaration existed and took place on that date and not prior to that date. . . . For the reasons aforesaid the declaration does not charge any legal duty upon the owners to the deceased.” Moreover, Mildred Gordon had been in continuous and uninterrupted possession of the premises for upward of two years prior to July 15, 1929, the date of the accident, and it has been generally held that where the possession of the tenant is continuous and uninterrupted, and it is not shown that the defect existed at the time the tenant went into possession, the landlord will not be liable for defects arising during that occupancy, especially where the tenant is charged with the duty of keeping the premises in repair. (Strong v. Soodvoisky, 141 Ill. App. 183; Hull v. Sherrod, 97 Ill. App. 298; and Thomas v. Vannucci, 185 Ill. App. 414.) There is also the circumstance in this case that prior to the accident the fence had been repaired by Mildred Cordon, evidently in a rather flimsy and improper manner, for which the landlord could not well be held liable.

Defendant urges other ground for reversal, but in the view that we take of the relationship of the parties, as expressed in the trust deed and the evidence relating thereto, we deem it unnecessary to discuss the same. This case was tried, and the appeal taken, under the Civil Practice Act, Cahill’s St. ch. 110, Ufí 196, 220 (Smith-Hurd Ill. Rev. Stat. (1933) ch. 110, sec. 192, par. 68 (3)b; sec. 216, par. 92) which permits us to dispose of the matter here without further proceedings. We are of the opinion that in view of the evidence and the language of the trust agreement, defendant could not be liable because it did not have possession or control of the premises nor the right to the possession and control thereof at the time of the accident, and that there was no duty shown from which any charge of negligence could be attributed to defendant. The judgment of the circuit court will therefore be reversed without remanding the cause and judgment entered here for defendant.

Reversed and judgment here for defendant.

Scahlah and Sullivah, JJ., concur.


text:
    The People of the State of Illinois ex rel. Edward J. Barrett, Plaintiff, v. The West Side Trust and Savings Bank of Chicago, Defendant. L. H. Heymann et al., Appellants, v. William L. O’Connell, Receiver, and Edward J. Barrett, Appellees.
    Gen. No. 37,837.

      Heard in the second division of this court for the first district at the October term, 1934.
    Opinion filed May 24, 1935.
    Rehearing denied June 5, 1935.
    John M. Lee and Carl M. Loos, both of Chicago, for appellants.
    Thomas D. Fash and Michael J. Ahern, both of Chicago, for certain appellee.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

January 12, 1934, the auditor of public accounts appointed William L. O’Connell receiver of the West Side Trust and Savings Bank, pursuant to the power vested in him under section 11 of An Act to Revise the Law with Relation to Banks and Banking (ch. 16a, Cahill’s Ill. Rev. Stat. 1933), and thereafter, on January 15, 1934, he filed a bill of complaint in the superior court of Cook county, alleging in substance that the capital stock of the bank had become impaired, that its business was being conducted in an unsafe manner, that a receiver had been appointed by him, and invoking the court’s jurisdiction for the following specified purposes:

(1) That a hearing may be had and a decree entered finding that the capital stock of the bank had become irreparably impaired and to determine by its decree that it could not be reorganized and should be liquidated through a receivership.

(2) To find by its decree that the auditor of public accounts had designated William L. O’Connell, a reputable person as receiver of said bank, that he had' filed his bond for $10,000 as security for the faithful performance of his duties as required and was then in possession of the title to the banking house, furniture, fixtures, books, records.and assets of said bank, for the purposes of the receivership.

(3) That the receiver may, upon filing proper petitions, be authorized and directed by the court, from time to time, to sell or compound all bad or doubtful debts due and owing said bank, to sell all real estate and personal property belonging to it, on such terms as the court might direct, to compromise claims and debts due and owing said bank whenever the best interests of creditors should so require, always subject to the approval of the court.

(4) That the receiver be authorized to present from time to time petitions to the court seeking its aid and direction with reference to various problems arising in the administration of the assets, property and estate of said bank.

(5) That the receiver be directed to present to the court, from time to time as required, a full and perfect inventory showing all assets, property and effects of said bank coming into his possession.

(6) That in case there be a remainder of the proceeds of the assets of said bank, after the payment of all claims previously proved or adjudicated, as required by law, and all the costs and expenses of the proceedings and receivership, said receiver be directed to report the amount of such remainder to the court for its further order and direction.

(7) That the receiver be directed to file with the clerk of the court, after collection and distribution of all the proceeds of the assets of said bank, an itemized report of all moneys received and disbursed by him.

(8) That the corporate existence of the bank may be terminated and dissolved, and

(9) That complainants and the receiver have such other and further relief in the premises as equity may require and to the court shall seem meet.

Simultaneously with the filing of the bill of complaint, the receiver entered his appearance in said cause.

Thereafter, on April 26, 1934, L. H. Heymann, John P. Hooker, Henry Isaacs, Nelson Morris and Max Blum, constituting a committee for the protection of the holders of certain mortgage bonds sold by the bank and organized pursuant to the provisions of a deposit agreement dated September 30, 1931, filed a petition in said cause setting forth, among other things, that each of the trust deeds securing the various issues of mortgage bonds sold by the bank contained the following provisions:

“The Trustee may at any time resign and discharge itself of and from the trusts hereby created by resignation in writing filed in the Recorder’s office of the county or counties wherein the mortgaged property is located.
“In case the Trustee hereunder shall resign, be removed, or be dissolved or otherwise become incapable of acting hereunder, a successor or successors may be appointed by the holder or holders of a majority in amount of the bonds then outstanding hereunder, by an instrument or concurrent instruments in writing duly signed by them and recorded in the Recorder’s office of the county or counties wherein the mortgaged property is located; or in case said bondholder or holders shall not appoint a new trustee or trustees hereunder, as aforesaid, within thirty days after any such vacancy shall occur, then the holder or holders of any one or more of said bonds may apply to any court in the county or counties wherein said mortgaged property, or any part thereof, is located, having general chancery jurisdiction, for the appointment of a new trustee hereunder, upon such notice to such person or persons as the court may direct, or upon such notice as shall be in accordance with the statute or the rules of such court.”

The petition further alleged that section 11 of the Banking Act provides that “As soon as can be reasonably done, the receiver of the bank shall resign on behalf of the bank all trusteeships”; that several demands had been made upon the receiver of the bank and his attorneys for such resignation from the trusteeships under the various trust deeds, but except in a few instances, they had refused to resign. Petitioners prayed for leave to intervene and for an order ruling the receiver to resign from all trusteeships under which the West Side Trust and Savings Bank had been acting as trustee, within a short day to be fixed by the court. On that date the court entered an order granting the prayer of the petition, and requiring the trustee to resign within 30 days.

May 10, 1934, petitioners filed a second petition setting forth various provisions of the deposit agreement dated September 30, 1931, and alleging that pursuant to the terms of said agreement numerous bonds had been deposited with the West Side Trust and Savings Bank, as depositary; that petitioners had made demands upon the receiver and his attorneys for a list of the bondholders who had deposited their bonds under such agreement with the depositary, but that the receiver had refused to produce the list, and prayed for an order requiring the receiver (1) to deliver all bonds then on deposit to the American National Bank & Trust Company of Chicago, the successor depositary; (2) to deliver to the petitioners a list or lists setting forth as to each property upon which bonds had been deposited pursuant to said agreement (a) the loan number, (b) the location of the property, (c) the amount and bond number deposited, and (d) by whom deposited, together with the address of the depositor. The court entered an order on May 10th granting the relief sought and ordering the receiver to furnish the desired information within a short day.

May 25, 1934, the receiver, with the concurrence of the attorney general, asked leave to file a motion to vacate said orders, which was predicated on the ground that the court lacked jurisdiction and that petitioners had no right to the relief granted. A hearing was had before the court, and June 14, 1934, a decree was entered, which was likewise concurred in by the attorney general, sustaining the motion and dismissing the intervening petitions for want of jurisdiction to entertain them.

The principal question presented for review is whether the auditor of public accounts and the receiver of a closed bank, appointed by him under the Illinois Banking Act, are subject to the jurisdiction of the court before whom the bank liquidation proceeding is pending, except as to those matters over which the court is given express supervisory powers by statute. The material portions of section 11 of the Banking Act, Cahill’s St. ch. 16a, fí 11, are as follows:

“. . .If the Auditor determines that the bank cannot be reorganized and that the same should be liquidated through receivership he shall appoint a receiver and require of him such bond and security as he deems proper. Such receiver, under the direction of the Auditor, shall take possession of, and for the purpose of the receivership, the title to, the books, records and assets of every description of such bank, and shall proceed to collect all debts, dues and claims belonging to it, and, upon the order of a court of record of the county in which said bank is located, may sell or compound all bad or doubtful debts, and on a like order may sell the real and personal property of such bank, on such terms as the court shall direct.
“Such receiver shall file with the Auditor of Public Accounts a copy of each report which he makes to the court, together with such other reports and records as the Auditor may require.
“Such receiver shall have authority to sue and defend in his own name with respect to the affairs, assets, claims, debts and choses in action of such bank. He shall also have the authority and it shall be his duty, under the direction of the Auditor, to surrender to customers of such banks their private papers and valuables left with said bank for safekeeping upon satisfactory proof of ownership. . . . He shall have the power and authority to redeem . . . collateral . . . whenever the Auditor deems it to the best interest of the creditors of said bank so to do, and to do such other things and take such other steps from time to time under the direction and approval of the Auditor as may reasonably appear to be necessary to conserve the trust estate and secure the best interests of the creditors of said bank.
“Such receiver may petition the Circuit Court of the county in which such bank is located or any judge thereof . . . for authority to borrow money and to pledge the assets of such bank as security therefor.
“The Auditor . . . shall, upon appointing a receiver, cause notice to be given . . . calling on all persons who -may have claims against such bank to present the same to such receiver and to make legal proof thereof, and in case the Auditor . . . has instituted suit or proceedings for the dissolution or winding up of the affairs of such bank in the Circuit Court of the county where the bank is located, such persons or the receiver to whom such persons have presented their claims may present the same to the clerk of such court and the allowance or disallowance of such claims by said court in connection with the said proceedings shall be deemed an adjudication in a court of competent jurisdiction. . . .
“From time to time the Auditor . . . shall make a ratable dividend of the moneys collected by such receiver on all such claims as may have been proved to his satisfaction or adjudicated in a court of competent jurisdiction . . . and shall make further dividends on all claims previously proven or adjudicated.
“The receiver of such bank shall, after the expiration of said twelve weeks, file with the Auditor and with the clerk of such court as may have charge of the liquidation, a correct list of all creditors of said bank . . . who have not presented their claims. . . . Such claims so filed shall be deemed proven, unless objections are filed thereto . . . within such time as shall be fixed by the Auditor or by such court as may have charge of the liquidation. . . .
“At the close of the receivership, it shall be the duty of the receiver to turn over to the Auditor all books of account and other records of such bank for preservation. ’ ’

In a recent decision the Supreme Court of this State interpreted the Banking Act as conferring no jurisdiction on any court, either to appoint a receiver for a closed bank or to collect §,nd distribute its assets. (People ex rel. Barrett v. Shurtleff, 353 Ill. 248.) A similar result was reached in construing the Insurance Liquidation Act in the case of People ex rel. Palmer v. Niehaus, 356 Ill. 104, where the court held that the receiver appointed by the director of insurance was an executive or administrative officer and that the duties of collecting and disbursing the assets of a defunct insurance company were imposed upon an official of the executive department, subject to limited supervision by a court of equity. Petitioners concede that under these authorities the receiver was properly appointed, but they contend that by filing the bill of complaint the auditor of public accounts and his appointee, the receiver, invoked the general equity powers of the court and thereby subjected themselves and the assets and affairs of the defunct bank to the control and direction of the court and vested it with jurisdiction to entertain the petitions presented.

The courts of our State have not passed on this question as applicable to bank liquidation proceedings under the statute but, by analogy, a long line of federal decisions affords considerable enlightenment upon this branch of the case. The banking law of this State is similar in many respects to the acts of Congress relating to the liquidation of closed national banks. U. S. Code, Title 12, Banks and Banking, sec. 192, provides:

‘1 Such receiver, under the direction of the comptroller, shall take possession of the books, records and assets of every description of such association, collect all debts, (lues and claims belonging to it, and, upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubtful debts, and . . . may sell all real and personal property, on such terms as the court shall direct . . . and may if necessary to pay the debts of such association, enforce the individual liability of the stockholders.” Except for the last portion, giving to the receiver the right to enforce stockholders’ liability, the foregoing section follows the Illinois Banking Act exactly.

In interpreting the provisions of the Banking Act, the federal courts have consistently held that the receiver appointed by the comptroller is not the officer of the court but is an officer or agent of the United States, and not subject to the jurisdiction of the court, except as to the administrative power expressly given to the court by the statute. Thus, in In re Chetwood, 165 U. S. 443, where it was contended that the filing of a proceeding by the receiver for the sale of personal property constituted a submission to the jurisdiction of the court of the receiver and the affairs of the bank, the court said (p. 459):

“From the terms of the national banking law itself, we think it plain that no such result followed its presentation. Our attention has been called to no case in which it has been held that the filing of such petitions by national bank receivers in the. Federal courts operates to make the receiver an officer of the court or to place the assets of the bank within the control of the court in the sense in which control is acquired where a receiver is appointed by the court.”

In Fifer v. Williams, 5 F. (2d) 286, the receiver had applied to the court under the act for an order approving his plan to transfer or sell substantially all the assets of the bank. An appeal from the order approving the sale was dismissed on the ground that the application to the court under the statute did not subject the assets or the affairs of the receiver to the general jurisdiction of the court, and in passing upon the point the court said (p. 288):

“In the present matter, as in the Chetivood case, supra, the application was entitled ‘In the matter of’ the receivership of the insolvent bank. By the application the receiver did not submit himself and the affairs of the bank to the jurisdiction of the court; nor did the presentation of the application operate to make the receiver an officer of the court, or place the assets of the bank under the control of the court ‘in the sense in which control is acquired where a receiver is appointed by the court.’ . . . He belongs to the executive branch of the government, and his custody of the assets is not that of the court.”

In Jackson v. McIntosh, 12 F. (2d) 676, it was held that the remedy of a creditor of a closed national bank to prevent the consummation of a wrongful sale of the assets by the receiver cannot be had in the liquidation proceeding, but in a separate suit for an injunction.

In Hulse v. Argetsinger, 18 F. (2d) 944, the court, in dismissing an appeal from an order approving a settlement with directors of a national bank, said (p. 945) that

“The receiver of a national bank appointed by the comptroller is his officer, not an officer of the court, nor are its assets while in his hands in custodia legis. . . . They do not become such by an order confirming a composition of debts made by him. Such an order is merely a condition upon the receiver’s power to compound the debt; it is not made in any suit, nor does it adjudicate any rights inter partes. (Fifer v. Williams, 5 F. (2d) 286; Jackson v. McIntosh, 12 F. (2d) 676, 678.) It is the exercise of a visitatorial power, given to the court by the statute, and limited to that function. It is an administrative check upon the otherwise unconditioned powers of the comptroller. ’ ’

In the case of Ex parte Moore, 6 F. (2d) 905, it was said (p. 908) that

‘ The receiver is not an officer of the court, nor does the receiver by this application submit himself and the affairs of the bank to the jurisdiction of the court ; nor does the presentation of the application operate to make the receiver an officer of the court, or place the assets of the bank under the control of the court ‘in the sense in which control is acquired where a receiver is appointed by the court. ’ This proceeding is an ex parte proceeding, and though by the will of Congress put under judicial cognizance, is not by its own nature a judicial controversy.”

Other States haye placed a similar construction upon their banking laws. In Bennett v. Duke, 38 G-a. App. 598, 144 S. E. 686, the reviewing court reversed an order directing the superintendent of banks to pay over certain funds of the bank to a commissioner appointed by the court, and in the course of its opinion said (p. 687):

“The superintendent of banks having in charge an insolvent bank for liquidation under the authority of the Banking Act ... is an officer of the State, charged with the duty of administering the assets of the bank in accordance with the terms and provisions of the act, and, notwithstanding the act provides that the superintendent of banks, in the performance of certain duties devolving upon him as such liquidating officer of the bank, such as making disbursements for expenses incurred in the liquidation of the bank and in selling the assets of the bank, must obtain an order of approval from the judge of the superior court, the superintendent of banks is not an officer or a receiver of the superior court. In administering the assets of the bank he is not amenable to the jurisdiction of the superior court. The power which is lodged in the judge of the superior court to approve the amount fixed as provided in . . . the banking act . . . is not judicial, but administrative only. . . . ”

The same court, in Cochran v. Bennett, 37 Ga. App. 202, 139 S. E. 428, said:

“The judge of the superior court, when passing upon an application of the superintendent of banks for permission to sell the assets of a bank which has been taken over by the superintendent, and in passing an order authorizing a sale of the assets of the bank by the superintendent ... is not administering the assets of the bank, and passes upon and adjudicates no rights of parties, but is merely, under statutory authority, directing a state officer, who is not an officer or r'eceiver of the court, in the discharge of a statutory duty.” (Citing several of the foregoing federal cases.)

In State ex rel. Richmond v. District Court, 45 Wyo. 29, 14 P. (2d) 673, the court issued a writ of prohibition preventing the District Court from entering an order permitting the receiver to borrow from the Reconstruction Finance Corporation. The court, after citing some of the foregoing authorities, said (p. 681):

“These authorities make it plain, we think, that the district court has no legal authority to deal with the affairs of an insolvent bank in the hands of the state examiner unless the statute so directs. The argument for the defendants is, as we understand it, that the general chancery power of the court to control and direct a receiver appointed by it may be here invoked by the state examiner and the latter thereby transformed, under the circumstances here shown, into an officer of the court and derive his authority to act from that source. But the whole scheme of the.law relative to the administration of the assets of insolvent banks, as the citations above given show, repels any such view. ’ ’

The State of Utah has a statute in many respects similar to the Illinois Banking Act, and in construing the same the court, in Riches v. Hadlock, 80 Utah 265, 15 P. (2d) 283, said (p. 287):

“By the statute . . . it is clear that as to banks and banking institutions the Legislature in such case took from the courts . . . their time-honored equity or chancery prerogatives in the appointment of receivers and in directing and controlling them as officers of the court. . . . The commissioner takes possession and holds it without the aid of, and despite, judicial action. It is of little moment what the commissioner be called, whether a statutory receiver or what not. . . . He is a mere executive creature of the statute, not of the court, and can exercise only such powers as the statute has given him; and no order of the court applied for can be broader than the statute. In other words, he is a public agent or officer of the State and derives his power from the statute.” The court then proceeds in its opinion to state, most clearly and concisely, the distinction between a chaneery receiver and a bank receiver as created by the statute, as follows (p. 288):

“A striking dissimilarity between a chancery receiver and the bank commissioner as here created by the statute is, that the former is a creature and an officer of the court, who in all primary matters is under the orders and directions of the court, and whose custody of property and assets of the bank is the custody of the court to be administered under its orders and directions, while the latter is a creature and a public officer of the state, whose custody of the property and assets of the bank is not the custody of the court, and where the assets are to be administered by bim without aid or direction of the court, except as by the statute otherwise provided. Thus, in determining what power in the premises may be exercised by the commissioner or what orders or directions may be given him by the court, we must look to the statute.” Other cases to the same effect are Miracle v. Dixon, 121 Okla. 180, 249 Pac. 153; In re Union Bank of Brooklyn, 163 N. Y. S. 485; and Therrell v. Rinaman, 107 Fla. 110, 144 So. 327.

These cases, federal and State, and others cited in defendants’ brief are generally to the effect that receivers in liquidation proceedings, appointed under statutes similar to ours, are administrative officers and not subject to the jurisdiction of the court except as to such supervisory powers as may be conferred on the court, by statute, for specified purposes.

The receiver takes the position that the only supervisory power, administrative or judicial, over him or the auditor is found in that portion of the Illinois statute which provides that the receiver may (1) sell or compound bad or doubtful debts; (2) sell real or personal property; and (3) adjudicate claims filed with the clerk of the court before whom the dissolution suit is pending. However, the same section of the statute also provides that “as soon as can reasonably be done, he (the receiver) shall resign, on behalf of said bank, all trusteeships, guardianships, conservator-ships, and all appointments as executor and administrator, making in each case a proper accounting on behalf of said bank. ’ ’ The language of the statute is mandatory. The receiver in the case at bar had been appointed January 12, 1934, and more than four months had elapsed when, on May 25, 1934, the receiver moved to vacate the order requiring him to resign all trusteeships. This certainly constituted reasonable and ample time within which to comply with the statutory requirement. Unless the receiver voluntarily resigned, as the statute requires he should, there was no way to enforce his resignation except by court order, and it would be idle to contend that a court could not direct him to resign when in disobedience of the statute he had failed or refused so to do. While the statute provides no method for carrying out the mandate of the legislature, the implication is plain that a court will enforce it when its jurisdiction is invoked for that purpose, and petitioners certainly ought not to be required to institute new proceedings to enforce rights made available by statute in a pending suit. We hold that the right of petitioners to compel the resignation of the receiver from trusteeships is statutory, and constitutes just as much a supervisory power conferred on the court by statute as the other powers conceded by the receiver to have been vested in the court. Therefore the first petition, filed April 26, 1934, asking solely for the resignation of the receiver from trusteeships in which the bank had been designated, was improperly dismissed for want of jurisdiction.

Petitioners insist that the court should also have retained jurisdiction to afford the relief prayed in the second petition, filed May 10, 1934, and the gravamen of their argument is that the subject matter of the petition constituted a “claim” within contemplation of the statute. No cases are cited to support this contention, however, and we believe the statute is not susceptible to so broad a construction. The claims referred to in the statute are evidently those of creditors of the bank which were in being when the bank closed. 7 Corpus Juris 743 states that “among claims which may be allowed against an insolvent or dissolved bank may be mentioned deposits, notarial charges, . . . loans . . . and a claim for loss resulting from the bank’s breach of a lease.” All of these are money claims, in existence at the date of the closing of the bank. The relief sought by petitioners is not a claim in that sense of the word, but rather the adjudication of several independent rights based upon an agreement between numerous bondholders under various issues, and petitioners, as a committee representing all the bondholders, seeking an order on the receiver to deliver all bonds then on deposit under the depositary agreement to a successor depositary and for certain lists and information calculated to aid petitioners to enforce the agreement and protect the rights of the bondholders. The statute confers no supervisory power on the court with reference to con-, troversies. of this nature, and no such powers can be fairly implied from any provision of the statute. Courts should not by construction seek to change the nature of the liquidation proceeding as defined by statute, so as to confer upon the court the general powers of a court of chancery. That is not the purpose of the statute, and the cases hereinbefore cited, construing similar statutes, so hold. The petitioners herein say that certain bonds were wrongfully or fraudulently withheld by the auditor or his receiver. One of the questions, therefore, necessarily presented to the court by this petition involves the validity of the agreement, and if that were to be determined by the court, the liquidation proceeding would completely lose its administrative character.

Petitioners also seek to invoke the doctrine that when a court of chancery has once obtained jurisdiction of the subject matter, it will retain the same for all purposes and do full equity between the parties. This rule of law is not applicable to the situation before us, because the proceeding here is not a chancery proceeding. The statute provides that the auditor of public accounts may file a bill in any court, and not necessarily in a court of chancery, and the decisions construing similar statutes characterize the proceeding as of an administrative character, conferring jurisdiction on the court only for the purposes specified in the statute and those that may fairly be implied therefrom. Consequently, in determining the extent of the court’s power, we must examine the statute and not invoke the rules applicable to general chancery proceedings.

Our attention is called to the fact that the court entered certain orders approving the payment of fees of the receiver and his solicitors, and based upon these facts it is argued that the court also had jurisdiction to entertain the second petition. The propriety of entering orders for the allowance of fees is not before us, but the fact that such orders were entered would not confer upon the court general jurisdiction if such did not exist.

In conformity with our views, the petition of April 26, 1934, praying for an order directing the receiver to resign all trusteeships within a short day should have been entertained, and accordingly that part of the decree of June 14, 1934, dismissing said petition for want of jurisdiction will be reversed and the cause remanded with directions that the court order the receiver to resign, within a short day to be fixed by the court.

Because the subject matter of the petition of May 10, 1934, is foreign to the liquidation proceeding, and jurisdiction to hear the same is not expressly, nor by implication, conferred on the court, we are of the opinion that said petition was properly dismissed for want of jurisdiction and accordingly that part of the decree will be affirmed.

Reversed in part and cause remcmded with directions; and affirmed in part.

Scanlan and Sullivan, JJ., concur.