text:
    Grace Stramaglia, Appellee, v. Conservative Life Insurance Company of Wheeling, West Virginia, Appellant.
    Gen. No. 42,470.

      Opinion filed May 5, 1943.
    Arthur S. Lyton and Olaf A. Olson, both of Chicago, for appellant; Peter J. Benda, Jr., of Chicago, of counsel.
    McCabe, Abrahams & Daly and Nunzio Giambalvo, all of Chicago, for appellee; Nunzio Giambalvo and Leo O. McCabe, both of Chicago, of counsel.
   Mr. Presiding Justice Burke

delivered the opinion of the court.

John C. Nuzzo is the State agent for the Conservative Life Insurance Company of Wheeling, West Virginia. In 1940 an agent for this company, Vito C. Partipilo, worked out of the office of Mr. Nuzzo. Mr. Partipilo successfully solicited Vitangelo Stramaglia of Chicago to apply for a life insurance policy in the sum of $2,000, at an annual premium of $93.36. Part 1 of the application is dated April 4, 1940. He designated his wife, Grace Stramaglia, as beneficiary. A clause of the application reads: “That the insurance hereby applied for shall not take effect unless the first premium is paid and the policy delivered to me during my lifetime and good health.” Part 2 of the application, for the medical examiner, is dated April 5, 1940. The policy, with a copy of the application attached thereto as a part thereof, was issued by the company at its home office in Wheeling, West Virginia on April 17,1940 as of April 5,1940. The policy was then forwarded to Mr. Nuzzo, the State agent of the company at Chicago, for delivery. It was received in Chicago on or about April 18, 1940, Mr. Nuzzo gave the policy to the agent, Mr. Partipilo, on the same day, for delivery to the insured. At the time the application was signed insured paid the agent $3 on account of the first annual premium. On April 19, 1940 insured paid the agent an additional sum of $30 and delivered to the agent a promissory note signed by the insured and his wife, covering the balance of the first year’s premium on the policy, and also covering a policy on the life of insured’s son. The latter policy is not involved. The policy was not physically delivered to the insured until May 8, 1940. The note given on April 19, 1940 was paid by instalments over a period extending to February 1941. The policy provides that the first year’s insurance thereunder “is modified preliminary term insurance,” and also states that it is issued “in consideration of the application therefor, copy of which is hereby attached and made a part of this contract, and of the payment in advance of $93.36 for the term of one year from the date hereof.” The policy also contains the following clause: “In further consideration of the first year’s premium this insurance will be renewed upon the payment' of a like amount on or before the 5th day of April in each year during the lifetime of the insured. A grace of one month (not less than 30 days) will be granted for the payment of each premium after the first, during which time this policy shall continue in full force.” The second annual premium was not paid. Vitangelo Stramaglia died on May 20, 1941. His widow and beneficiary, Grace Stramaglia, filed an amended complaint in the circuit court of Cook county against the company to recover on the policy. After issue joined the case was tried before the court and a jury. At the close of all the evidence the court sustained a motion by plaintiff for a directed verdict in her favor, and thereupon such a verdict was returned by the jury and judgment entered in favor of plaintiff and against defendant for $2,100, being the face value of the policy, plus interest. Defendant prosecutes this appeal for the purpose of reversing the judgment.

It is plaintiff’s theory that the policy of-insurance did not become effective until it was delivered to the insured on May 8, 1940; that-in consideration of the annual premium paid by the insured he was to receive one full year’s insurance; that the insurance could not be forfeited or lapsed and did not terminate until May 8,1941, plus 30 days ’ grace; that any other terms in the policy providing for the payment of a second annual premium on April 5, 1941, or indicating a forr feiture or lapsation for nonpayment of premium on that date, arc not to be construed as denying to the insured the full year of insurance protection the policy means to give him and which he paid for; that the policy remained in full force and effect until May 8, 1942, plus 30 days’ grace, and was so in force and effect at the time of the insured’s death; that assuming that the policy could have been forfeited and lapsed on April 5, 1941, the defendant failed to forfeit and lapse the same in accordance with a statute of this State. Defendant’s theory is that by its express terms the policy became and was in effect as of April 5, 1940 and was subject to renewal only by payment of the second premium on April 5, 1941 (or within the grace period thereafter) which premium was never paid or offered; that under the terms of the policy and the uncontradicted facts the effective date of the policy, as a proposition of law, was not controlled by the date of physical delivery of the policy to the insured, whether on May 8, 1940, as alleged by .plaintiff, or on April 19, 1940, as indicated by the record; that under any of these hypotheses the policy was not in force or effect on May 20, 1941, the date of insured’s death.

An examination of the record discloses that there is no substantial dispute as to the facts. It is conceded that when on April 19, 1940, the insured gave to the agent the promissory note signed by himself and his wife for the balance of the premium, this constituted payment of the premium. The evidence introduced by plaintiff establishes that the policy was not delivered to the insured until May 8, 1940. Defendant, however, states that the testimony as to delivery is inconsistent with the several payments made by the insured, the promissory note for the balance of the premium given by the insured on April 19th and the receipt for the premium given him ■ “apparently on April 19, 1940,” acknowledging payment of the first premium continuing the policy in force only until April 5, 1941.

Defendant asserts that parties to a life insurance contract are entitled to agree upon its terms, including the dates. and conditions upon which it takes effect, terminates or may be renewed, and that it is the duty of the courts to enforce such agreement and not to substitute another and different one. Plaintiff agrees with this statement, but urges that the stipulation in the application (which is a part of the policy) that the insurance shall not take effect unless the policy is delivered to insured during his lifetime and good health, is a valid provision, and renders the policy inoperative and without force and effect until delivery to the insured. The evidence clearly shows that the policy was not delivered until May 5, 1940. Plaintiff maintains that the insurance did not become effective until the policy was delivered and that the premium of $93.36 was intended to pay for coverage for one year. She insists that the insurance remained in full force and effect for a period of one year after delivery of the policy, plus a period of 30 days’ grace, and argues that as the insured died on May 20, 1941, within the period of grace, the policy was in effect at that time and that the court was right in directing a verdict in her favor. Defendant correctly states that a contract of insurance, like any other agreement, consists of an offer by one party and the acceptance thereof by the other. Defendant maintains that in the instant case the offer consisted of an application by Vitangelo Stramaglia for a policy of insurance. upon his life; that the offer was accepted by defendant by its issuance of the policy exactly as applied for; that the policy was dated April 5, 1940 and by its terms was subject to renewal only by and upon payment of a similar amount of $93.36 on April 5, 1941 and annually thereafter; that everything in the policy, including the contestability and suicide clauses, dated from the date of the policy; that by the express terms of the agreement there can be no doubt that the policy became effective as of April 5, 1940 and continued in effect only until April 5, 1941, when the second premium became due; that when, on April 19, 1940, the insured paid an additional cash amount on the premium and gave the agent his promissory note (also signed by plaintiff) for the balance, the insured was furnished with a written receipt stating that the payment continued “the insurance in force until April 5, 1941”; that both the policy and the receipt were accepted, paid for and retained by the insured without question or comment; that no fraud was practiced upon the insured; that no misrepresentation was made to him; that there was no agreement or provision in the contract that the effective date was to be deferred until the date of physical delivery; that there was no ambiguity in the contract, no doubtful language calling for judicial interpretation, and that the trial court was in error in directing a verdict for plaintiff. Consistent with the foregoing, on April 17, 1941 defendant wrote the insured telling him that some time ago “we forwarded notice of the premium due April 5th.” This letter also informed insured that a grace period of one month is provided, which grace period would expire on May 5, 1941. Defendant stated that it was taking that means to again call the matter to his attention and that it was its desire to assist him in every way possible to continue the protection in force. On May 9, 1941 defendant wrote plaintiff another letter, reciting the lapsation of the policy and offering to reinstate it upon the terms specified. The insured made no acknowledgment of or response to these communications and made no payment of the second premium. We find that the uncontradicted evidence shows that the receipt for the full amount of the premium was delivered to the insured at the time the policy was delivered to him, namely, May 8, 1940. It is interesting to note that Mr. Nuzzo, the State agent of defendant, testified that Mr. Partipilo, the agent, paid that part of the premium which was not to be retained by the agent to his (Nuzzo’s) office on May 9, 1940, the date following the delivery of the policy to the insured.

The law is well established that if all the terms have been agreed upon, between the parties, the formal delivery of the policy by the insurer and its acceptance by the insured are not essential to its validity, but if the terms have not been agreed upon, or if the application provides, and it is a condition of the policy itself, that it shall not become effective until it is delivered to the applicant, the contract of insurance will not become binding until such delivery. In the instant case the application and the policy constitute the contract between the parties. The first annual premium was paid on April 19, 1940. Had the agent delivered the policy to the insured on that day, plaintiff could not recover as the insured died on May 20, 1941, which was one day after the expiration of the period of grace. Defendant contends that the insurance became effective as of April 5,1940. It is apparent that if the insured died before the policy was delivered to him the insurance would not be in effect and recovery could not be had on the policy. Defendant states that the provision that the contract should not take effect unless the policy was delivered during the lifetime and good health of the insured was intended only for the protection of the insurer against illness contracted between the dates of application and issuance, respectively, citing Johnson v. Royal Neighbors of America, 253 Ill. 570; Hungate v. New York Life Ins. Co., 267 Ill. App. 257. We are of the opinion that the purpose of the provision is to protect the insurer against illness contracted between the dates of the application and the delivery of the policy, and also to protect the insurer against liability in case of death of the insured before delivery of the policy. From a careful reading of the cases, we are convinced that the insurance companies consider the provision concerning delivery of the policy to be important. In some of the cases cited evidence was introduced of written instructions by the insurance companies to their agents as to delivery and these instructions pointed out that delivery of the policy was not to be made until the agent had ascertained that the insured was alive and in as good a state of health as at the time of the application. Weber v. Prudential Ins. Co. of America, 208 Ill. App. 117. The record in the instant cage does not indicate what instructions, if any, were given to the agent. In Hungate v. New York Life Ins. Co., 267 Ill. App. 257, the court, in speaking of contracts of insurance containing provisions that they should not take effect until the first premium was paid, nor unless on the day of payment thereof the insured was alive and in sound health, said:

“It has been held that if any length of time elapses between the making of the application and the issuing of the policy, it is the duty of the insurer to make inquiry when the policy is delivered as to the condi- ' tion of the health of the insured, and if it fails to do so the delivery is conclusive against the insurer as to the . completion of the contract.”

In the Hungate case the court cited American Trust Co. v. Life Ins. Co. of Virginia, 173 N. C. 558, 92 S. E. 706; Grier v. Mutual Life Ins. Co., 132 N. C. 542, 44 S. E. 28; National Life Ins. Co. v. Grady, 185 N. C. 348, 117 S. E. 289. From these cases it is apparent that •the courts considered that the provision of the application as to delivery of the policy was intended to give the insurance companies and their agents the power to withhold delivery of the policy until the premium was paid during the lifetime of the insured while he was in good health.

' "We agree with plaintiff that the case at bar is a suit upon a policy containing a “delivery provision” and that the general proposition of law stated by defendant that actual delivery of a policy of insurance is not essential to its validity, has "no application. From the cases cited we are satisfied that the giving of the policy to the subagent for delivery to the insured did not constitute delivery to the insured. We do not doubt that under the facts of some cases the agent would be deemed to have received delivery of the policy as agent of the insured and to be holding the policy for the insured. However, that is not the case here. Mr. Partipilo, the agent, did not testify, and the record is silent as to why he did not deliver the policy until May 8, 1940. Defendant states that some policies, or the applications therefor, contain the provision that the contract shall not become operative “until and unless delivered in the lifetime and good health” of the insured, and that even in such cases' the courts have held consistently that the sole purpose of the provision is to preclude the consummation of the contract in cases where the applicant has contracted a disease between the date of the application and the issuance of the policy. Defendant points out that the word “until” was not used in the contract in the instant case, that this word involves the element of time, that the application provided that the insurance should not take effect “unless the first premium is paid and the policy delivered” in the lifetime and good health of the insured, that these conditions were met and the offer having been accepted as made, the contract became effective- in accordance with its terms. Defendant argues that no time element being involved, payment of premium and physical delivery to the insured could be made at any time; that the premium was actually paid on April 19, 1940 and the policy delivered during the lifetime and good health of the insured and that the policy became operative as and when provided therein and the second premium became due as and when stipulated. We agree with the statement of plaintiff that there can be no recovery unless the policy is delivered during the lifetime of assured and that if the policy is delivered when the insured is in bad health (leaving aside waiver) there is still no coverage, and that if the policy is paid for, issued, and in the hands of the agent, but not delivered, and the applicant is in perfect health, there is still no insurance. Obviously the policy cannot be delivered after the death of insured. We have examined the cases cited and find that the words “unless” and “until” are used interchangeably, and that the word “unless” as used in the application in the instant case may be construed to have the same effect as the word “until” used in other policies that have been passed upon by the courts.

Plaintiff asserts that where a policy of insurance contains inconsistent, conflicting and ambiguous provisions, the one which affords the most protection to the insured will control. We find that this statement is sustained by the authorities. In Vance on Insurance (2d ed.) page 287, there appears the following succinct statement:

“An interesting and important question concerning forfeiture of policies for nonpayment of premiums has arisen out of the practice of insurers to date policies issued as of the same date with the application, which is also made the date for the payment of the recurring annual premiums, while the policy does not in fact take effect as a contract until delivery and payment of the first premium at a sonfewhat later date. The result is an inconsistency between the several terms of the contract. Upon payment of the first premium and delivery of the policy the insured is, under its terms, entitled to insurance for one year. Since the insurance usually begins only with the delivery of the policy, and not from the date written upon it, the year during which the insured is entitled to protection should begin on the day of delivery and extend to the same day in the succeeding year. Yet the policy also provides that if a premium falling due at a date, specified in the policy, earlier than the last day of the year stipulated for, shall remain unpaid, the policy shall be forfeited. Put briefly, the insurer by one term of his contract sells the insured protection for one year from a certain date, and then in another term declares the failure to pay a premium within that year will cut short the insurance bargained and paid for. One term insures for a whole year, another for part of a year. Applying the well settled rule that in cases of uncertainty and repugnancy the court will always adopt that construction which will avoid a forfeiture, it would seem safe to conclude that the insurer will not be allowed to declare the insurance forfeited before the expiration of a full year from the time when the policy is delivered, even though the express terms of the contract may render it forfeitable upon failure to pay an annual premium at an earlier day.”

This subject is discussed in Shinall v. Prudential Ins. Co. of America, 91 Colo. 194, 14 P. (2d) 183; Stramback v. Fidelity Mut. Life Ins. Co. of Philadelphia, 94 Minn. 281, 102 N. W. 731; Halsey v. American Cent. Life Ins. Co., 258 Mo. 659, 167 S. W. 951; Johnson v. American Cent. Life Ins. Co. of Indianapolis, Ind., 212 Mo. App. 299, 249 S. W. 115. We agree with the contention of plaintiff that the policy of insurance provides in numerous places for one year’s insurance. On the back of the policy appears the statement: “Premiums on this policy may be paid annually; Eate $93.36.” The application, par. 7 (e), reads: “Annual premium $93.36.” In the middle of the first page of the policy appears the following statement: “The first year’s insurance under this policy. . . .” The policy at this point also states: “In further consideration of the first year’s premium . . . The last paragraph of the policy reads: “The mode of premium payment may be changed from annual to semi-annual or quarterly installments, or vice versa.” Mr. Nuzzo testified that the premium on the policy is “correctly set forth as $93.36; that premium is for one year; is calculated by taking into consideration the age of the insured, the type of insurance, on one year’s basis.” The books and records of defendant provided for one full year’s insurance. The policy ledger sheet of defendant reads: “Premium for full year, $93.36.” The termination sheet of defendant reads: “Premium for full year.” Defendant’s original card reads: “Amount of premium', annual, $93.36. Net premiums, first year.” Defendant’s premium receipts ledger sheet reads: “Premiums, first year, $93.36.” The receipts issued by defendant to the insured all provide for an “annual premium” or a first year’s premium. The receipts given to the insured as payments were made to read: “First annual premium on the policy.” The receipt given to the insured for the full amount of the premium reads: “For $93.36, in payment of first year’s premium.” We agree with plaintiff that it is evident from the terms of" the policy, the testimony of the State agent, the language of the receipts issued and the wording and contents of'the books and records of defendant, that the latter intended to and in fact did contract to provide the insured with one full year’s insurance, and that the insured intended and in fact did contract to and did receive one full year’s insurance, for which protection he paid one full year’s premium. The application for insurance provides that “the insurance hereby applied for shall not take effect unless the first premium is paid and the policy is delivered to me during my lifetime and good health.” The receipts recite the following: “Being the first annual premium on a policy applied for on this day with the understanding that the policy shall be in force if issued and delivered in accordance with the provisions of the application.” The policy provides: “This policy is issued in consideration of the application therefor, copy of which is attached and made a part of this contract, and of the payment in advance of $93.36 for a term of one year from the date hereof.” The policy also provides: “In consideration of the first year’s premium this insurance will be renewed upon the payment of a like amount on or before the 5th of April in each year during the lifetime of the insured.” These provisions seem to indicate that the insurance was for a full year, plus a 30 day grace period. We agree with the contention of plaintiff that it is apparent that the several provisions recited are ambiguous, inconsistent and in conflict with each other and render the time uncertain as to when the insurance is to terminate. The provision indicating termination on April 5, 1941 would, actually give to the insured protection for a period of less than 11 months. The provision appearing in the application and premium receipts governing the date the insurance is to take effect, would terminate the policy on May 8,1941, plus a 30 day grace period. This provision would give the insured one full year’s insurance. It is our view that this is what plaintiff sought to purchase and in fact did purchase. We have read and analyzed, the numerous cases and text books cited by the respective parties and believe we have followed the trend of thought. A discussion and differentiation of these cases would not be helpful.

Plaintiff asserts that assuming that the defendant insurance company had a right to forfeit or lapse the

contract of insurance on April 5, 1941 (after 30 days’ grace), no forfeiture or lapsation was ever effected, and cite par. 1, sec. 846, ch. 73, Ill. Rev. Stat. 1941 [Jones Ill. Stats. Ann. 66.909], that:

“No life company doing business in this State shall declare any policy forfeited or lapsed within six months after default in payment of any premium, installment or interest or any portion thereof, nor shall any such policy be forfeited or lapsed by reason of non-payment when due of any premium, installment or interest, or any portion thereof, required by the terms of the policy to be paid, within six months from the default in payment of such premium, installment or interest, unless a written or printed notice stating the amount of such premium, installment, interest or portion thereof due on such policy, the place where it shall be paid and the person to whom the same is payable, shall have been duly addressed and mailed with the required postage affixed, to the person whose life is insured, or the assignee of the policy, (if notice of the assignment has been given to the company) at his last known post office address, at least fifteen days and not more than forty-five days prior to the day when the same is due and payable, before the beginning of the period of grace. Such notice shall also state that unless such premium or other sums due shall be paid to the company or its agents the policy and all payments thereon will become forfeited and void, except as to the right to a surrender value or paid-up policy as provided for by the policy. The affidavit of any officer, clerk or agent of the company or of any one authorized to mail such notice that the notice required by this section bearing the required postage has been duly addressed and mailed shall be presumptive evidence that such notice has been duly given.”

Plaintiff contends that the record is void of any evidence establishing a compliance with this requirement» Defendant sought to prove, by the reading of the transcript of the testimony taken by deposition of Clem E. Peters of Wheeling, West Virginia, president and manager of defendant, that a premium notice in accordance with the above statute was mailed to the insured in due time prior to April 5, 1941. Defendant used a regular form of notice, which was sent out a month prior to what it contends was the due date of the annual premium. The form of notice is kept in the records of defendant. Defendant also offered as an exhibit an affidavit by Mary M. Dailer, a clerk, showing that notice in due form was mailed to insured during the month of March 1941. The court excluded the proffered evidence apparently on the ground that it was secondary. It will be observed that the statute provides that the affidavit of any officer, clerk or agent of the company, or of any one authorized to mail such notice, that the notice required by this section bearing the required postage has been duly addressed and mailed shall be presumptive evidence that such notice has been duly given. As the legislature had the right to require the notice to be given, it also had a right to prescribe how the giving of the notice could be proved. We are of the opinion that the court erred in excluding the testimony as to the giving of notice in accordance with the statute.

We find that the record is free from reversible error. The judgment of the circuit court of cook county is affirmed.

Judgment affirmed.

Hebel and Kiley, JJ., concur.


source: Caselaw Access Project

author: Mr. Justice Hebel

license: Public Domain

text:
    Herbert R. Friedlund, Appellant, v. Lawrence Cunnally et al., Appellees.
    Gen. No. 42,259.
    Opinion filed May 5, 1943.
    Friedlund, Levin & Friedlund, of Chicago, for appellant.
    James Thorpe and Frederick C. Jonas, both of Chicago, for appellees.
   Mr. Justice Hebel

delivered the opinion of the court.

This is an appeal by the plaintiff from that part of the order vacating and setting aside judgment by confession against certain defendants upon five notes secured by junior mortgage. The makers of the notes conveyed title to the real estate, which stood as security for the payment of the notes. Before maturity and by mesne conveyances, all of which were subject to the junior mortgage, the title was conveyed to George W. Stilwell and his wife. Stilwell made payments upon the notes regularly until the date of maturity and for approximately three years thereafter. During the period of his ownership he executed a deed in trust upon certain uses and for certain beneficiaries to the Builders and Merchants State Bank, and the receiver of that bank reconveyed to Stilwell eighteen months later. During this period there was no break in the chain of payments made by Stilwell and no written extension agreements were executed nor did Stilwell execute any written agreement to pay the indebtedness.

The real estate which stood as security for the payment of the notes was later lost by Stilwell through foreclosure of the first mortgage. Judgment was confessed upon the junior mortgage notes more than ten years after the date of maturity but less than ten years after the last payment made by Stilwell. Upon motion and petition, pleading the statute of limitations as a bar to the plaintiff’s action, the court vacated the judgment by confession entered, with leave to appear and defend and stand as security. Trial was then had, with testimony taken and argument of counsel ■ received, whereupon the court in due course entered an order upon finding, that judgment by confession be vacated and set aside as to the defendants Lawrence Cunnally and Marie Cunnally and judgment to stand in full force and effect against remaining defendants who did not answer. Plaintiff filed notice of appeal and also filed his appeal bond and perfected this appeal.

From the fact's as they appear in the record it appears that on or about March 22, 1926, at Chicago, Illinois, the defendants, appellees, Lawrence Cunnally, Marie Cunnally, and others, signed as maker five judgment notes, all dated March 22, 1926, and each payable to bearer in the sum of $2,570, together with interest thereon at the rate of 6 per ¿ent per annum, payable monthly. All of the notes matured and became due on November 22, 1929 and each and all of the notes were secured by a junior mortgage on real estate located in Chicago, Illinois.

It further appears from the record that on or about the 30th day of June, 1926, the defendants Lawrence Cunnally, Marie Cunnally, and others, by warranty deed conveyed their title to the real estate which stood as security for the payment of the notes to Emil Fagerstrom and his wife, who took title subject to the junior mortgage. By mesne conveyances, all of which were subject to the same junior mortgage, the title to the aforementioned real estate was conveyed to George W. Stilwell and his wife on or about the 12th day of April, 1928.

Subsequent to their conveyance to Emil Fagerstrom no one of the defendants at any time ever made payment on the indebtedness evidenced by their several judgment notes, although defendants’ successors in title made frequent payments on account of principal and interest.

Oil or about the 11th day of March, 1932, George W. Stilwell made his last payment on account of principal and interest to the then holder and owner of the aforementioned five judgment notes. On or about the 5th day of May, 1941 judgment by confession was entered in favor of the plaintiff, in the amount of $16,686.66 and costs. Execution issued on or about May 9, 1941.

It further appears from the record that upon motion of defendants the court entered an order on or about June 4, 1941 to vacate judgment by confession entered with leave to appear and defend, judgment to stand as security, the petition to stand as affidavit of defense, and the execution was stayed.

Subsequently, on or about September 10, 1941, an order was entered giving leave to file a stipulation of facts instanter, and same was filed with the court on that date; that trial was had and testimony was submitted by the plaintiff to prove the dates of payment made upon the indebtedness.

On January 26,1942, the trial court entered an order upon finding that judgment by confession of May 5, 1941 be vacated and set aside as to defendants and judgment to stand in full force and effect against the remaining defendants.

It appears that the parties stipulated, by written stipulation filed in this cause, that the defendants signed as makers of the five judgment notes on which judgment was confessed. The notes are all dated March 22, 1926, and are each payable to bearer in the amount of $2,570 each, with interest thereon at 6 per cent per annum payable monthly, and that they all matured and became due on November 22, 1929; that all of the notes were secured by a junior mortgage on real estate in Cook county; that on June 30, 1926, the defendants conveyed their title to the real estate which stood as security for the payment of the notes to one Fagerstrom and wife, and that by mesne conveyances the title to the real estate was conveyed to one George Stilwell; that all of the conveyances were subject to the junior mortgage securing the notes.

At the trial of the case George W. Stilwell in the course of his examination testified that he had never had any dealings with the Cunnallys; they never told him at any time to make any payment of principal or interest on the second mortgage; that he made payments after he took over the building. The Cunnallys admitted signing the notes and the ownership of the real estate in 1926; that in 1926 they sold it and thereafter had no further connection with it and paid no principal or interest on the note after they parted with the title and authorized no one to pay principal or interest.

From the briefs that were filed the defendants’ theory of the case does not appear in plaintiff’s brief, and is briefly stated as follows: Defendants’ theory is that payments made by the mortgagors’ grantee or successor grantees cannot' toll the statute of limitations as to the mortgagors or otherwise affect their liability in an action on the notes, and even though payments were made by remote' grantees of the defendants (mortgagors) no implied authority arises so as to bind the defendants and extend their liability; further, that such remote grantees were not the agents of the defendants (mortgagors) for the purpose of making a new promise which would toll the statute of limitations as against them, and that a partial payment of principal and interest does not arrest the statute of limitations in an action at .law on the notes.

It is further suggested by the defendants that the power in the grantees to make payment on the said mortgage is exclusive and different from the right to make a new promise which would bind the defendants; that such payments if made by the grantees might keep the debt alive and, consequently, keep the mortgage lien valid so as to authorize a foreclosure, which is a proceeding in rem against the property, but personal liability of the makers of .the note cannot be extended or imply a promise on the part of the grantees so as to extend liability of the mortgagors beyond the regular period of limitations.

Defendants further suggest that while there are no findings of the court incorporated in the judgment order, plaintiff assumes certain findings of the court in enumerating the errors relied upon by him for reversal,'but that the court properly vacated the confession of judgment upon the notes as to these defendants. That there is no finding by the court that an action in personam might not lie, although a suit in rem might lie; that as an abstract proposition of law defendants will show' that such a situation might well arise.

It appears from the facts that the defendants on-March 22, 1926, executed the notes in question in this case and as security therefore executed a junior mortgage on the premises owned by them. Three months thereafter the defendants sold the building, the deeds to the grantees reciting that the property was subject to the junior mortgage in question. Thereafter the property changed hands a number of times, the last grantee being one George Stilwell who lost the property by foreclosure of a prior mortgage on the premises. All of the conveyances to the successive grantees conveyed the property subject to the junior mortgage securing the notes involved in this proceeding.

It would appear too from the facts that are called to our attention that payments were made on both the principal and interest by the successive grantees, the last payment being made on March 11,1932, by George Stilwell, the then owner of the premises.

From the facts as they appear in this record there was no contractual relationship that existed between the defendants and the grantees of the property for the payment of the mortgage, either of principal or interest, and that no agreement was made by the last grantee, Stillwell, with the defendants for the payment of principal or interest, and the undisputed fact, as far as it has been called to our attention, is that Stilwell was not acquainted with the defendants Lawrence Cunnally and Marie Cunnally, and had never talked to them about the mortgage.

The undisputed evidence indicates that the defendant Lawrence Cunnally was employed as a motorman on the Rapid Transit Lines, and that he and his wife Marie Cunnally were residents of the city of Chicago continuously since 1929; that they had no knowledge of any payments of either principal or interest by any of the successive grantees, including Stilwell, the last grantee. It is likewise clear that they at no time ratified or confirmed any payments by their grantees or had any knowledge that any such payments were made until judgment was confessed against them fifteen years after the execution of the notes by them and twelve years after the notes fell due.

It appears, as is suggested by the parties in their briefs, that the sole issue is whether the payments of principal and interest by a mortgagee of the mortgaged property who purchased such property subject to a mortgage may be imputed to the mortgagors so as to remove the bar of the statute of limitations in an action at law on the notes against the mortgagors.

The first question that is called to our attention is whether the right of the holder sof a mortgage to foreclose may remain even though the personal liability on the note may fie barred. The defendants in this action, however, draw a very clear distinction between a suit in rein and a suit in personam, and contend that a bill to foreclose a mortgage lien may be maintained even though personal liability on the notes is barred.

And then 'our attention has been attracted to the statement in the brief of the defendant that where payment on the mortgage was made within ten years prior to the filing of the complaint by a grantee of the mortgagor, such payments serve to keep the debt alive for the purpose of foreclosure and only a decree in rem is sought, even though the personal liability on the notes of the mortgage may be barred. It is suggested by these defendants that the statutes of the State of Illinois provide the time when a lien of a mortgage or trust deed ceases by limitation; likewise the time within which foreclosure proceedings may be brought (Ill. Rev. Stat. 1941, ch. 83, secs. 11, 11b [Jones Ill. Stats. Ann. 107.269, 107.270(1)]).

The case of Macfarland v. Utz, 175 Ill. App. 525, is cited as an authority by the parties in this litigation. The plaintiff in his brief quotes from this case, to which defendant subscribes, as follows:

“While personal liability on the note as against Archibald W. McCandless was barred by the statute of limitations, the right of cross-complainant to foreclose the trust deed still existed.”

In the Macfarland case a mortgage note was dated April 1893, made by one McCandless. The note was due five years after date. In March 1896, McCandless conveyed away the premises and thereafter he paid no interest on the note but his grantee did pay. In September 1907, foreclosure proceedings were brought and McCandless, who was a party defendant, pleaded the statute of limitations. The master in chancery to whom the cause was referred reported that while liability on the note against the maker was barred by the statute of limitations, the right to foreclose the trust deed still existed, and the court said:

“Upon the issues of fact involved, the evidence supports the findings of the master incorporated in the decree.”

And again the court said:

“The position assumed by plaintiffs in error [Mc-Candless] is predicated upon the theory that no foreclosure can be had under the trust deed apart from the existence of a personal liability, upon the note against the maker or against one who may have assumed its payment. . . . Such payment of interest served to toll the statute of limitations and to keep alive the debt for the payment of which the mortgaged property was primarily liable. The decree of foreclosure here involved is in rem, not in personam.”

The plaintiff in his brief erroneously concludes that the Appellate Court contradicted the master’s finding of personal liability on the note. The fact is that the master’s findings were incorporated in the decree. The decree was affirmed by the Appellate Court and certiorari denied by the Supreme Court.

Our attention is attracted to the case of Lyman v. Zearing, 187 Ill. App. 361, where only a decree in rem was sought and no personal liability on the notes was involved.

Then again in the case of Markus v. Chicago Title & Trust Co., 373 Ill. 557, the court held that the holder of a note secured by mortgage had three remedies, vis.: foreclosure, ejectment, or action in assumpsit on the note. In that ease a corporation signed a mortgage note. The corporation was dissolved and no action was commenced on the notes within two years after its dissolution. Subsequently, a suit to foreclose the mortgage was instituted and a defense was urged that since no personal recovery could be had on the notes no foreclosure could be maintained. The court held that the action was one in rem and that the dissolution of the" corporation did not have the effect of destroying the mortgage lien against the premises, though it did bar, after two years, any action against the corporation itself.

Defendant further suggested and urged that whether the plaintiff could have maintained a foreclosure suit in May of 1941, at the time he confessed judgment, assuming he still had a lien in the property, and whether the defense of the statute of limitations interposed by either the mortgagor or the grantee would have been a goqd defense to such foreclosure suit, is wholly a moot question and not before this court.

If is stipulated of record by the parties that all of the conveyances of the property from the defendants, beginning with the conveyance from the defendants, to the final conveyance to the last grantee, Stilwell, were subject to the junior mortgage securing the notes in question. There was no assumption clause in.any of ■the deeds. The deed to Stilwell was offered in evidence, but the document itself does not appear in the record nor in the abstract. Likewise, the trust deed executed by the defendants was offered as plaintiff’s exhibit 1, but that document does not appear either in the record or in the abstract. However, under the stipulation of facts entered into between the parties, it is admitted that all of the conveyances were subject to the junior mortgage.'

Defendants suggest and it appears that when property is conveyed subject to a mortgage, the relationship between the grantor and grantee is akin to that of principal and surety, except that the property in the hands of the grantee becomes primarily liable for the debt and the grantor remains personally liable on the notes. No personal liability is assumed by the grantee. It is not his debt and the only interest that he has in paying it is to protect his property from foreclosure. He has no contractual obligation with the grantor to pay. The grantor on the other hand did not designate the grantee as an agent, either expressly or impliedly, to make payment for him. The grantee under such circumstances has the right to make payments for himself to save his property, but he has no right to make such payments for and on behalf of the mortgagor as an acknowledgment of the mortgagor’s debt or a new promise on his part, and it appears too that the holder of the mortgage could not compel Stilwell to pay the indebtedness. Stilwell had not agreed in writing to pay it. He had not assumed the indebtedness, and there are no facts or circumstances in this case from which one might infer a promise on the part of Stilwell to pay and bind the defendants. It appears from the evidence that no authority was ever granted to any of the grantees to make payments. It does not appear that there was any ratification or confirmation, because the defendants did not know of any payments having been made. The grantee, Stilwell, and defendants were not even acquainted and never had any direct dealings. ,

The law is well settled, as it is suggested, in other jurisdictions, and cases bearing on this question have been passed upon in Illinois. In the late case of Conerty v. Richtsteig, 379 Ill. 360, decided in 1942, a deficiency judgment was entered against the mortgagors who sold the property in 1923, the purchaser assuming the mortgage. The mortgage fell due in 1925 and was extended by various extension agreements until 1935. The interest on the mortgage debt was paid by the purchaser until July 1936, and in September of that year a foreclosure suit was started. The mortgagors had no connection with the property or with the extension agreements after they sold the property in 1923. They contended in the foreclosure suit that the statute of limitations had run as to them and that they were not personally liable on the notes. A deficiency decree was entered against them in the trial court, from which decree an appeal was taken. The decree was affirmed by the Appellate Court. The case was heard in the Supreme Court on appeal from the Appellate Court and the judgment awarding a deficiency reversed. The Supreme Court said:

“Nielsen assumed the payment of the mortgage debt by his acceptance of the deed-to the property. This deed was dated February 6, 1923. It is conceded in the record that appellants did not make any payments on the notes after that date. ... A cause of action on the note against appellants was therefore barred at the time the suit was brought, unless the extension agreements entered into between the holder of the note and Nielsen were binding on appellants.”

The court concludes its opinion by stating:

“No payments having been made by them or by their authority on either the principal or interest, and there having been no extension which was effective as to them, no judgment could lawfully be entered against them under the pleadings and upon the facts in the record.”

In other jurisdictions the courts have held that payments made by a grantee who has assumed a mortgage do not operate to prevent the running of the statute of limitations against the liability bf a mortgagor on his note, and in the case of Trustees of Alms-House Farm v. Smith, 52 Conn. 434, which has been cited by the defendants, the court held:

“Where a mortgagor conveys the equity of redemption and ceases to pay interest on the mortgage note, the regular payment of interest by the grantee does not operate to prevent the running of the statute of limitations against the liability of the mortgagor on the note.”

In support of this suggestion is the case of Mack v. Anderson, 165 N. Y. 529, 59 N. E. 289, in which the court held:

“Where the mortgagor has made no payments on a mortgage debt for twenty years, payments thereon by grantees of a portion of the premises, who have assumed the debt, do not arrest the operation of the statute of limitations in favor of the grantee of another parcel thereof, who has not assumed the payment of the mortgage debt and has neither made nor authorized any payments thereon within that time, and an action to foreclose the mortgage as against him is barred.”

To the same effect is the case of Boughton v. Van Valkenburgh, 46 App. Div. 352, 61 N. Y. S. 574.

Payments were made in the instant case by Stilwell for three years after the mortgage became due by its terms. The defendants did not ask him to make these payments; neither was Stilwell bound to do so by reason of any contractual relation between the parties. Stilwell made the payments to protect the property from foreclosure and apparently for no other purpose, not to protect the mortgagors, and certainly such payments should not prolong the defendants’ liability on the note, which, under the authority of the Conerty case is wholly independent of the mortgage.

A further case is the case of Regan v. Williams, 185 Mo. 620, 84 S. W. 959, where it was held:

“The payment of interest by the vendee in such case, while the note is yet alive, will not stop the running of the statute of limitations as to the vendor, because after the assumption of the debt by the vendee the vendor (the maker of the note) is no longer a principal but a surety and they are not thereafter jointly obligors.”

Further, in the case of Cottrell v. Shepherd, 86 Wis. 649, 57 N. W. 983, the court in discussing the question of the statute of limitations in a foreclosure suit where a deficiency decree was sought against the maker of the mortgage who had sold the premises subject to. the mortgage and whose grantee had made some payments within the statutory period of limitations without the knowledge of the maker of the mortgage, the court said:

“Inasmuch as such payments to remove the bar of the statute must have the effect of an acknowledgment of the debt or a new promise, they should be made by some person who had the right to acknowledge the debt or to make the new promise, — either the mortgagor or his authorized agent. In application to this case, the grantee had the right to make payments for himself to save his land, but had no right to make such payments for and on behalf of the mortgagor, as an acknowledgment of his debt or as a new promise on his part. ’ ’

It appears too that all of the Illinois cases bearing-on the subject involve foreclosure suits which were suits in rein, and the inevitable conclusion and logical reasoning is that while payments by a grantee may operate to keep the debt alive for the purpose of foreclosure where only a decree in rem is sought, such payments do not operate to keep alive the personal liability of the mortgagor beyond the statutory period of limitations. Macfarland v. Utz, 175 Ill. App. 525; Pinkney v. Weaver, 216 Ill. 185; Lyman v. Zearing, 187 Ill. App. 361.

It would appear that the law lays down the theory that when mortgaged property is sold subject to a mortgage, the grantee or his successor does not become an agent of the mortgagor with authority to bind him by a new promise, and the bare- authority or power to make payments does not operate to suspend the statute of limitations as to the mortgagor in an action on the notes. Where the property is conveyed subject to the mortgage it is obvious that no express 'contractual relationship or obligation arises between the parties to pay the debt. This being so, can it be said that an implied agency or authority can be imputed to the grantee? The facts in this case negative any such implication. It would appear that in the case of Wanamaker & Brown v. Plank, 117 Ill. App. 327, the court passed upon this question, and that where the mortgaged property is sold subject to a mortgage as we have suggested, the grantee or his successors do not become the agents of the mortgagor with authority to bind him by a new promise. It appears in the Wanamaker case that one Plank made a note dated September 7, 1889, to plaintiffs for $644; that he deposited it with one Carroll and also delivered as collateral security another note for $5,000 dated July 29, 1889, payable five years from date. Carroll made a payment on the original note on May 6, 1893. Suit was brought on the note by the payees on April 14,1902. The statute of limitations was pleaded by the defendant. Plaintiff urged that the payment by Carroll was in the capacity of agent for the defendant and created a new promise to pay the debt. The court said:

“No doubt such new promise will be implied by the law when made by an agent for the debtor by the-latter’s authority and with his consent, but such authority cannot be implied. There must be an actual affirmative intention by the debtor to make a payment upon a note before a promise can be inferred.”

And, further, the court said:

“The bare authority to make the payment does not necessarily imply authority to bind a principal by a new promise to pay.”

It would appear that in the case at bar there could be no ratification of the acts of the grantees because the defendants were not cognizant of the fact that payments had been made by any of the grantees. This is undisputed in the record. Neither was there any ratification of the acts of the grantees. It cannot be said that the grantee, Stilwell, was in any sense the agent of the defendants for the purpose of making a new promise. The incidental powér of the grantee, Stilwell, to make payments operated to the benefit of the grantee himself; it protected his property from foreclosure, and it was not made for the benefit of the defendants.

It follows that if no liability can be charged against the defendants by reason of any agency, express or implied, the payments of the grantee, Stilwell, or the payments of any of the other grantees could not operate to toll the statute of limitations as to the defendants in the present case. The notes in question fell due in November 1929, and the defendants could have been sued thereon within ten years thereafter, or, within a like period after the debt had been revived by a new promise or acknowledged by themselves or their duly authorized agent. There was no reviving of the debt or acknowledgment by the defendant subsequent to 1926.

It appears from the facts as they are in this record that no agency existed with authority either in fact or by operation of law that effectively extended the liability of these defendants on the notes. The relationship of the mortgagors and the grantees created no obligation on the part of the grantees to make payments where the property was conveyed subject to the mortgage.

Under the numerous authorities that have been cited we believe that it is conclusively shown that the payments made by the grantees in such circumstances did not suspend the operation of the statute of limitations as to the mortgagors, and that the liabilities on the notes expired ten years after their due date.

It appears from the law as it has been cited, which is unquestionably against the plaintiff, that there is no statute of this State and no decision either in this State or any other State cited by the plaintiff which supports his claim.

The relief which the plaintiff seeks in effect would extend the period of limitation far beyond the time anticipated or “contemplated by the legislature. He is asking for something to which he is clearly not entitled, and therefore under the circumstances we are of the opinion that the judgment and order of the trial court were proper and in harmony with the law and should be affirmed.

Affirmed.

Burke, P. J., and Keley, J., concur.


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    Hilda Resnick, Appellee, v. Frank Varouxakis et al., Appellants.
    Gen. No. 42,293.
    Opinion filed May 5, 1943.

      Marshal I. McMahon and Ralph E. Jacobson, both of Chicago, for appellants.
    Charles A. Resnick, of Chicago, for appellee.
   Mr. Justice Hebel

delivered the opinion of the court.

This is an appeal from a summary judgment entered against the defendants Frank Varouxalds and Beatrice E. Varouxalds for $2,354.35 .on a promissory note executed by the defendants Frank Varouxalds, Beatrice E. Varouxalds, George Long and Straty Yakomis, in the sum of $1,666.00, dated September 12, 1930. The defendants, in addition to executing a promissory note, also executed eight interest coupons for the purchase of certain realty from Arthur T. McIntosh & Company. The defendants filed an answer and amended answers to said complaint and summary'" judgment was rendered on the pleadings.

This case having been tried on the pleadings, the rulings in the lower court merely pass upon the pleadings filed by the parties.

The defendants, in executing the purchase money mortgage and a promissory note with interest coupons, knew the nature and effect of the instruments they signed but claim that the consideration, the value of the land sold to them, was misrepresented. Defendants say the salesman represented the value of this land at greatly in excess of its actual value, knowing that these representations were false, and with the intention that the defendants would act upon these misrepresentations. Further, that the defendants were told that all improvements had been paid for, that this was a misrepresentation, and that the defendants paid in a sum over a thousand dollars for this property, which payment was grossly in excess of its actual value. Defendants further submit that since fraud was alleged, a good defense was raised by the pleadings, and that this case should have been submitted to a trial court with a jury to pass upon the facts and the law.

It is urged that the plaintiff in answer to certain interrogatories propounded by the defendant stated that the notes in this case were purchased for the sum of ten dollars and other good and valuable considerations, and it further appears that although ordered by the court to give exact amounts of the purchase price of these notes, the plaintiff never submitted these; and that since there were misrepresentations to obtain the execution of this instrument and since the plaintiff took these notes with knowledge and notice of the infirmities, this defense may be a good defense against any action on the notes.

It is further urged by these defendants that where issue is joined and the case is set upon the jury call by the chief justice, the case remains on such jury call for trial unless removed by an order of the chief justice. It is ■ cited in support of the position taken by these defendants that under section 8 of the Municipal Court Act, it is provided inter alia,

‘‘ The Chief Justice shall also superintend the preparation of the calendars of cases for trial in said court and shall make such classification and distribution of the same upon different calendars as he shall deem proper and expedient.”

And that under the order* entered by the Honorable E. D. Scheffler, chief justice, this ease was placed on the jury calendar and the same had never been removed by any order of the lower court. It is urged that the trial court erred in entertaining plaintiff’s motion for a summary judgment, for the reason that the plaintiff has failed to comply with the order of Judge Schiller, directing that plaintiff give full and complete answer to the defendants’ interrogatories, making it impossible for the defendants to answer properly the plaintiff’s statement of claim; that after plaintiff had filed certain answers to the defendants’ interrogatories in which the defendant recited that the consideration paid for the notes in question was 10 dollars and other good and valuable consideration, the defendants ’ motion to strike the answer, which was. properly made and argued before Judge Schiller, was sustained and the court directed the plaintiff to file more complete answers to the interrogatories, but even to the present time such answers in accordance with the order of Judge Schiller have not been filed, and it is the contention of the defendants that subsequently the same matter was before Judge Quilici and passed upon by him in ruling that the motion for summary judgment was sufficient and that the plaintiff was entitled to the judgment demanded.

It appears from the record in this case that the misrepresentations charged by the defendants are as follows: “That this property was worth Forty-Nine Hundred ($4900.00) Dollars and that all necessary improvements were in and paid for.”

Upon the question of misrepresentation as to value of the property that was sold, as stated in the argument of the defendants, the value of the property was represented to be $4,900 but was much less. It appears from the case of .Tuck v. Downing, 76 Ill. 71, that the court there stated:

“Appellant was dealing with his own property, and had a right to ‘puff’ it in the most extravagant terms, the other party being at full liberty to exercise his own judgment about it.”

And it is urged by the plaintiff that there is nothing stated in defendants’ statement of defense to indicate that defendants had a right to rely on the seller’s representations of value; there is no relationship of trust set up as existing between the parties, nor does the defense use any words whatsoever alleging that they were prevented or hindered by words or acts of the seller from obtaining information elsewhere or independent opinions, as to the value of this property.

It is further urged that defendants in their statement of defense nowhere aver that they were denied ample opportunity to examine the real estate or to ascertain for themselves its true value or the true situation in respect to the local improvements. The property that is the subject of this controversy is located in Cook county, Illinois, and therefore is accessible. It would appear that an examination at the site of the real estate would reveal the character of the improvements that were in, and an examination of the records of the county would have shown the exact status of unpaid special assessments for local improvements.

It is urged that the defendants ratified the purchase and are estopped to claim fraud. It appears that the defendants affirmed the contract by paying the first three interest notes, which is admitted by the pleadings, since that allegation in plaintiff’s statement of claim has not been denied. The interest notes bear date the 12th day of September, 1930, payable every six months, and it can reasonably be inferred that if fraud had been perpetrated it could fairly be presumed to have come to their attention during the 18-month period over which these three notes had been paid, particularly since the defendants admitted knowledge by their own pleadings in using the following language:

“and this defendant relying on said representations executed the aforesaid notes, that subsequently thereto this defendant learned that the said property was of much less value than that represented to him and also that the said improvements were not in and paid for as represented.”

It is urged that it may be reasonably inferred, since they have not pleaded to the contrary, that they have retained the real estate and have never offered to tender it back, and their defense at no point shows that any complaint or remonstrance was made, and this for a period exceeding 11 years. It is contended that this constitutes an affirmance of the contract. It appears from this record that the defendant had notice of the fact that tax bills were sent out in Cook county about the first of May in each year, and it is urged that since the defendants do not state how or when notice of the purported fraud came to their attention, it is not too far fetched to assume that on the following May after the purchase of this real estate, bills for special assessments were sent out to and received by the defendants; that under those circumstances, having paid interest notes after being put on notice by receiving bills for special assessments, they have positively waived the alleged misrepresentation. Plaintiff quotes Black on Rescission and Cancellation, 1929 edition, volume 3, section 590, at page 1439, as follows:

“The right to rescind a contract, whether on the ground of fraud or for any other sufficient reason, may be waived and such waiver will not only prevent the party from thereafter maintaining any proceedings for the rescission of the contract, but will debar him from interposing the same facts in defense to an action upon it.”

It is well settled law in Illinois that one claiming fraud must disaffirm at the earliest possible moment or be estopped from thereafter charging fraud. He cannot remain silent, retain the benefits or deal with the subject matter of the contract and afterward avoid its burdens.

Defendants have not offered to excuse or to explain away the delay in disaffirmance and therefore under the rule of law that they must act promptly, the defendants are estopped to plead fraud because of their waiver in having remained silent all these years.

The defendants, however, contend that the failure of the court to compel plaintiff to answer their interrogatories specifically as to how much was paid by the plaintiff for the notes made it impossible for them to. answer the statement of claim. Plaintiff has answered “$10.00 and other good and valuable considerations.” However, the trial court held the defense to be insufficient and that it was immaterial what consideration was paid for the notes by the plaintiff, because the law presumed that the transfer of the notes was based on sufficient consideration, and that this point of view was held by the trial court is evident from the fact that plaintiff’s motion,to extend the time to answer the interrogatories until the court had decided the sufficiency of the defendants’ fourth statement of defense was approved by the court and the requested extension granted. Had the defense been held good in law, plaintiff would then have answered said interrogatories. Since, therefore, defendants failed to set up a defense valid even against one not a holder in due course we fail to see how defendants have been harmed.

In the instant case the trial court was exceedingly indulgent in allowing defendants to file four statements of defense. In the case of Chicago Title & Trust Co. v. Cohen, 284 Ill. App. 181, and also in the case of Bradley v. Progressive Metal & Refining Co., 205 Ill. App. 552, the Appellate Court sustained the refusal of the trial court to allow defendant to file a third affidavit of merits as within the lower court’s discretionary powers. It appears that the case of Bradley v. Progressive Metal & Refining Co., 205 Ill. App. 552, is also authority for the proposition that judgment rendered upon striking the affidavit of merits is a default judgment. This elementary point is inserted here in answer to the defendants’ assertion that Judge Quilici exceeded his authority by passing upon a motion for summary judgment which had already been considered, passed upon and denied by Judge Schiller on December 8, 1941, but entered judgment solely on the basis of the insufficiency of the fourth statement of defense.

The cases of Diversey Liquidating Corp. v. Neunkirchen, 370 Ill. 523, and Barrett v. Shanks, 300 Ill. App. 119, relied on by defendant, are not strictly in point. They differ from the instant case in that they were based on summary judgments decided on affidavits submitted by the plaintiffs. In these cases the lower court had decided on the affidavits before it that the plaintiffs were holders in due course. The effect of these decisions was to nullify the defenses which were otherwise good if proved against one not a holder in due course. The Appellate Court held that whether plaintiffs were holders in due course was a matter of fact for the jury to decide and could not properly be decided on affidavits by the court where that point was material. In the instant case judgment was rendered upon striking the fourth statement of defense for insufficiency, and not on affidavits.

Harris v. Willis, 209 Ill. App. 401 (Abst.), holds that trial by jury is improper when affidavit of merits has been stricken, and that a judgment as upon a default without a trial before a jury is proper, even though defendant has a jury demand on file.

Reid v. McKinney, 202 Ill. App. 129 (Abst.), holds that an affidavit of merits which fails to state facts in law which constitute a defense, or facts which, if true, will establish a valid setoff, is properly stricken, and thereby all statements and pleas in defense and setoff are automatically eliminated, since in the municipal court of Chicago pleas are unavailing unless the facts in the affidavit of merits constitute a defense in law to the action.

The entering of a judgment by default when no issue of fact is raised is proper even though the cause is on a jury calendar.

In the instant case no defense was filed which would have been good against one not a holder in due course, and, hence, whether the plaintiff was a holder in due course became immaterial. This left no issue of fact for the jury to decide, and judgment was therefore properly rendered upon the stricken defense.

Therefore the judgment that was entered- by the court will be affirmed.

Judgment affirmed.

Burke, P. J., and Kilby, J., concur.


text:
    Alex J. Passen et al., Appellees, v. United States Casualty Company, Appellant.
    Gen. No. 42,302.
    Opinion filed May 5, 1943.
    Burt A. Crowe and Carl E. Abrahamson, both of Chicago, for appellant.

      Robert McCormick Adams, of Chicago, for certain appellee.
    Abraham Lepine, Fred Ginsberg and Pines, Stein & Lipton, all of Chicago, for. certain other appellee.
   Mr. Justice Hebel

delivered the opinion of the court.

Alex J. Passen instituted suit against the United' States Casualty Company upon an insurance policy known as a burglary, larceny, theft and robbery policy. Passen’s claim was for the loss of jewelry which loss he alleged was covered by the policy. The case was submitted to the court without a jury on a stipulation of facts. Later Fred E. Hummel, as receiver in bank ruptcy'of Alex J. Passen, asked leave to intervene as a party plaintiff in the suit, which petition was granted. Thereafter the_ trial court entered judgment for $1,500 in favor of Alex J. Passen for the use of Fred E. Hummel, receiver in bankruptcy. The defendant, United States Casualty Company appeals.

The facts stipulated to by the parties are as follows:

1. On February 20, 1935, the defendant had issued its burglary, larceny, theft and robbery policy No. 824946 to the plaintiff insuring him, amongst other things under Clause 5, Section F, against personal holdup loss on money and securities not exceeding $50.00 and jewelry, watches, clothing and articles of personal adornment and other personal effects in the sum of $1500.00 and which policy was in full force and effect at the time of the loss.

2. On July 23, 1935, the plaintiff was held up and robbed of the following valued articles:

Due notice of which loss was given to the defendant and proof thereof filed on August 12, 1935, and all other conditions of the policy were complied with.

3. On April 23, 1935, the plaintiff had filed in the United States District Court for the Northern District of Illinois, Eastern Division, his petition in bankruptcy No. 59669 and on April 25, 1935, he was duly adjudicated a bankrupt by said court and on May 21, 1935, one Abraham Simon, was appointed trustee of the said bankrupt estate; that the aforesaid property was not scheduled by the plaintiff in his schedule in bankruptcy, and was not claimed as a part of his exemptions in said proceedings; that on the day of the aforesaid loss by holdup, the bankruptcy was still pending in said court and the said Abraham Simon was the trustee of the estate.

4. That in said bankruptcy proceeding the defendant was duly scheduled by the plaintiff as a creditor and the said defendant appeared in said proceeding and filed its claim in the sum of Three Hundred Eighty-two ($382.00) Dollars in said bankruptcy estate, which claim was duly allowed by the said court and on, to-wit: June 29, 1937, the defendant filed its objection to the plaintiff’s application for a discharge, alleging therein that in 1933, the bankrupt for the purpose of defrauding his creditors had transferred certain enumerated property and assets to others and knowingly and fraudulently omitted to schedule the said property in the bankruptcy proceedings; but there was no allegation in the .said objection to the plaintiff’s discharge in said bankruptcy proceedings of the failure of the plaintiff to schedule the property heretofore described in Paragraph 2; nor that he had fraudulently concealed the said property from the trustee in bankruptcy.

5. Thereafter, this defendant after having assigned its said claim of Three Hundred Eighty-two ($382.00) Dollars for a consideration of One Hundred ($100.00) Dollars to one Charles E. Cohen, abandoned its objection to the discharge of the plaintiff in the bankruptcy proceedings and on July 26, 1937, the objection of the defendant to the discharge was dismissed and the plaintiff was duly discharged as a bankrupt, pursuant to the bankruptcy laws of the United States in such cases made and provided; that on December 7, 1937, a first and final dividend of ten per cent was declared by Charles Adams, Referee in Bankruptcy, and the sum of Thirty-eight Dollars and Twenty cents ($38.20) was paid to the said Charles E. Cohen to whom the claim of the defendant has been assigned; and on January 12,1938, the said Abraham Simon, Trustee of the bankrupt estate, was, by the United States District Court for the Northern District of Illinois, Eastern Division, duly discharged and the said bankruptcy proceedings were then and there fully terminated.

It further appears from the record that while the suit of Passen against the United States Casualty Company was pending and before its determination by the trial court, the United States District Court was advised of Passen’s claim and loss of this jewelry, it appearing that prior to the alleged holdup and loss of the jewelry by Passen he had filed a petition in bankruptcy in the United States District Court and in his schedule of property owned he had failed and neglected to schedule the lost jewelry in question as an asset in the bankruptcy proceedings.

It also appears that Fred E. Hummel, receiver, in his petition so advised the circuit court and contended that he as receiver had an interest or title to any judgment that might be obtained by Passen. It was the contention of the receiver, Hummel, and of this defendant, that Passen having or claiming to have an ownership in the jewelry at the time of his petition in bankruptcy, even though he failed to schedule it in the bankruptcy proceedings, it became, by process of law, the property of the receiver in bankruptcy, and the trial court in its decision entered judgment in favor of Passen for the use of Hummel, receiver, thereby holding that Passen was entitled to no benefit or judgment by reason of the loss.

There is no point raised as to the pleadings in this action.

It appears from the contention of the plaintiff, Pas-sen, that the title to all undisposed assets belonging to him at the time of his adjudication as a bankrupt, whether scheduled or not, revested in him upon his discharge in bankruptcy and that therefore he has sustained a loss for which he has a right to maintain this action for indemnity.

The intervening petitioner and party plaintiff, the receiver in bankruptcy, Fred E. Hummel, contended that the jewelry rightfully and legally belonged to the bankrupt’s estate even though he failed to schedule it and that this title and ownership is continuing and that the receiver was not relieved of this title or interest by reason of a discharge in bankruptcy of Passen.

It is the contention of the defendant, however, that under the terms of the contract of insurance the policy insured but one person, Alex J. Passen, he being the named insured as provided by the policy; that Pas-sen’s title, right or interest in the jewelry ceased upon his petition to become a bankrupt, and that all right, title and interest to this jewelry then became vested and permanently so in the receiver in bankruptcy.

It appears, from a reference to the facts as stipulated to by the parties, that the policy was issued to Alex J. Passen, insuring him against personal holdup loss in the sum of $1,500 on various articles of jewelry and other personal effects; that Passen gave due notice of the loss and filed proof of such loss occurring on July 23,1935.

It is also stipulated that on April 23, 1935, Passen had filed his petition in bankruptcy and that the jewelry in question was not scheduled by him and was not claimed as a part of his exemptions.in the proceedings; and that on the day of the holdup the bankruptcy matter was still pending in the district court. Also, it was stipulated that in the bankruptcy proceeding the defendant was duly scheduled by the plaintiff as a creditor, and the defendant filed its claim for $382, which was allowed. Also, that thereafter the defendant assigned its claim for a consideration of $100 to one Charles E. Cohen, on July 26, 1937; that the plaintiff was discharged as a bankrupt according to the laws of the United States.

In this action it becomes important whether or not Fred E. Hummel as receiver in bankruptcy was entitled to a judgment, or whether this defendant was, under the terms and conditions of its policy of insurance, obligated to indemnify the receiver. It does not appear from any of the facts that have been stipulated to or any of the evidence in the record, nor is it denied that the plaintiff failed to schedule the property which is the subject-matter of this litigation. It appears from an examination of the authorities cited that they make no distinction as to whether the assets had been concealed or otherwise undisclosed by fraud or inadvertence in determining the right of the bankrupt to take over the undisposed of assets, and there is a case cited in 111 A. L. R. Ann., page 839, where it is stated:

" The question of the rights of a discharged bankrupt in concealed or undisclosed assets arises most frequently in cases involving persons other than his creditors. These persons may be either adverse claimants from whom the bankrupt seeks to recover the property in question, or debtors, against whom he seeks a judgment in his favor. In the former case the undisputed assets consist of some kind of tangible property, such as chattels or land, while in the latter case they are choses in action, such as notes or other contractual obligations. . . . There is considerable confusion among the authorities with respect to the right of a bankrupt to come into court after his discharge and recover assets of this kind from third persons. . . .

“It is apparent that the many circumstances involved in the cases make it difficult, if not impossible, to lay down any absolute rule with respect to the rights of the bankrupt against third persons in this class of cases. However, an attempt has been made to classify the cases according to whether they uphold what may be called the ‘majority’ view denying the bankrupt’s right of recovery, or what is herein called the ‘minority’ view, sustaining the bankrupt’s right in this regard. . . .”

And continuing on page 840, it is quoted from this authority:

“While as previously noted, each case should be considered with reference to its own particular facts, it may be said that, as a general rule the court favor the view that a bankrupt is not, after his discharge, entitled as against third persons, to assert any rights in the assets not disclosed by him in the bankruptcy proceedings.”

There is also cited as authority the case of Laing v. Fish, 119 Ill. App. 645, wherein complainant filed a bill for an accounting of the profits of a department in the defendant’s store under a contract for management which gave him the right to share in the profits. It appeared that complainant had been adjudged a bankrupt and a trustee elected, and that he was discharged, the court saying:

“The contention of the appellant amounts to this: that a bankrupt may, by his pleadings in the bankruptcy court, represent that he has not assets; that he may be discharged on that representation from his debts, without the payment of anything on them; and that then, although creditors have filed and proven claims against him in the bankruptcy court, on which they have received no dividend, the bankrupt may, on the ground that the trustee has also been discharged by an order of court from further duty, claim and prosecute a suit for assets, the existence of which he all the time knew, but concealed, and that he may then hold them free from interference by his former creditors. We should not naturally expect such a contention to be justified by authority, nor do we find it to be so. The cases cited by the appellant to sustain this contention are all distinguished by their facts from the case at bar. They are cases in which the trustee, exercising a privilege allowed him by the law, never took the property or assets involved because they were burdened by some incumbrance which made them a disadvantage rather than an increment to the estate, under which circumstances, as the title never left the bankrupt, he of course held it after his trustee had been discharged; and cases where the purposes of the trust in the trustee were accomplished, by the extinguishment by composition or payment of all debts proven in the estate.”

The theory of the defendant in the present proceeding is as stated by its counsel on page five of its brief, namely, that the right, title or interest of Mr. Passen as bankrupt, in his jewelry ceased upon the filing of his petition in bankruptcy. The plaintiff suggests that the general rule of law is that the legal title or ownership of a bankrupt’s property vests in the trustee in bankruptcy upon his appointment and qualification, and that such title in the trustee after his qualification relates back to the date of the adjudication in bankruptcy, and it is urged that there is sound basis for such a rule of law under the Bankruptcy Act and the cases, for the reason that the act was drawn and has been generally interpreted with the primary purpose of applying the property and rights of bankrupts for the benefit of their creditors; that the defendant, by its present position seeks to pervert the purposes of the act so as to relieve itself of a contractual obligation and that very evidently to hinder the application of a debtor’s assets to the use of his creditors.

It is further urged that there can he no question under the facts that the contract of insurance issued by the defendant insured Alex J. Passen, the bankrupt, against the loss of the jewelry in question; that the policy specifically provided that the insurance should apply to all such property owned by the assured. And it is urged that there can be no question that at the time the insurance was written Mr. Passen, who later became bankrupt, was the owner of the jewelry in question; that there can be no question that at the time he was robbed he was in possession of the jewelry in question. He did not schedule the jewelry and his trustee in bankruptcy was unaware of its presence or his ownership of the same. It is further urged that the risk under the policy as far as Mr. Passen, the bankrupt, and the defendant were concerned remained unchanged; and that the defendant would now avoid its obligation by a shrewd twisting of the legal fiction of ownership.

The courts have not hestitated to modify this general rule of bankruptcy law having to do with the passage of title and ownership of a bankrupt’s property and the time of the passage of such title and ownership when to do otherwise would merely serve to stultify the very purpose of the act itself. Reference is here made to the case of Fuller v. New York Fire Ins. Co., 184 Mass. 12, 67 N. E. 879.

This was a suit upon policies of fire insurance issued to one Callender upon his factory property. Thereafter on March 2, 1900, Callender filed a voluntary petition in bankruptcy and was adjudicated a bankrupt. On March 10, 1900, at 12:30 o’clock p. m., a receiver of his estate in bankruptcy was appointed. On the same day, March 10, 1900, at 7:55 p. m., the factory was destroyed by fire. On April 23, 1900, the plaintiff, Fuller, was appointed trustee in bankruptcy and filed suit for the collection of the insurance. The insurance company contended that neither the policies nor any right of action upon the policies passed to the trustee in bankruptcy, first, because the policies were nonassignable, and second, that upon the adjudication in bankruptcy of Callender, that Callender ceased to have an insurable interest in the property. Judgment was entered for the plaintiff, Fuller, the trustee in bankruptcy, and the insurance company, defendant, appealed.

In meeting the defendant’s contention that after Cal-lender had been adjudicated a bankrupt neither the policies nor any right of action thereon went to the plaintiff as trustee in bankruptcy and that Callender, after his adjudication as a bankrupt, ceased to have an insurable interest in the property, the Supreme Court of Massachusetts, after indicating that the policies were in their nature assignable and became the property of the trustee, affirmed the insurable interest of the bankrupt in Ms property. The court said:'

“The next contention is that, upon the adjudication that Callender was a bankrupt, he ceased to have an insurable interest in the property. But neither the policies nor the insured property vested in the trustee at the time of the adjudication. The insured property never vested in the trustee, because it was not in existence at the time of his appointment and qualification. The title to it remained in Callender until it was destroyed by fire, as also did the title to the policies. Hence the destruction of the property changed or ripened the conditional obligation of the insurers into a fixed obligation to pay the amount of indemnity stipulated for in the policy. . To hold that this ripening of the obligation made it after-acquired property, which would not vest in the trustee, but which the bankrupt could hold as his own, would be as absurd as to hold that, if goods which he had at the time of adjudication were converted by a stranger to Ms own use between the time of the adjudication and the appointment of the trustee, the right to maintain trover for their value would not pass to the trustee, but might be enforced by the bankrupt as after-acquired property. If an unmatured obligation on which there was no right of action at the date of adjudication should mature between it and the appointment of the trustee, the right of action upon it would be one which did not exist until after the adjudication, but there can be no doubt that it would vest in the trustee. In all such cases the new right of action may be compared to a fruit which has grown and ripened during the period of transfer, and which, being upon the branch at the moment when the property vests in the new owner, becomes his. The statute is to be construed in view of its general purpose of applying the property and rights of debtors for the benefit of their creditors, and, while the debtor’s property vests as of the date of the adjudication, it yet has the incidents which have become attached to it up to the time when it vests in the trustee upon his appointment and qualification.”

So that when we come to consider the questions that are involved in this case and to determine the question as to the right of action of the receiver in bankruptcy we have to consider the facts as they appear in this record. It has been contended that Mr. Passen, a bankrupt, had sufficient legal title and ownership of the property in question on June 23, 1935, the date he was robbed, to satisfy the terms of the policy and the provisions of the Bankruptcy Act and the law arising thereunder, and therefore to support the judgment herein appealed from.

As between the bankrupt and the defendant he was still in possession of the jewelry and the risk of the defendant had not been increased. As between the bankrupt on the one hand and his creditors and trustee in bankruptcy on the other, strict legal title and ownership may have belonged to the trustee in bankruptcy. However, as between the bankrupt and the defendant, the trustee in bankruptcy having no knowledge of the existence of the property itself nor of the chose in action arising therefrom, its disclosure in the schedules having- been inadvertently omitted, there was sufficient legal ownership and title of the jewelry in the bankrupt on the day of the robbery and thereafter of the chose in action arising therefrom, until disclosed to the successor trustee in bankruptcy, to support the judgment of the plaintiff herein.

So it appears from the facts as they are in this record that there was sufficient ownership and title of the jewelry in the bankrupt upon the day of the robbery, and thereafter he had a right of action as against the defendant but having filed his petition in bankruptcy, Fred E. Hummel, additional party plaintiff herein, as receiver in bankruptcy of Alex J. Passen, succeeded to the right to the chose in action.

It appears from this record that the order of the district court authorized Fred E. Hummel, as receiver in bankruptcy to intervene and to become a party to the proceedings in the circuit court of Cook county. The said receiver having, as we have indicated, succeeded to the right of action, was a proper party as additional plaintiff.

From the record as it appears, the order of judgment entered in the circuit court of Cook county, in the sum of $1,500 in favor of Alex J. Passen, for the use of Fred E. Hummel, plaintiff herein, as receiver in bankruptcy of Alex J. Passen, or for the use of the trustee in bankruptcy of Alex J. Passen who may hereafter qualify, and against the defendant, United States Casualty Company, a corporation, should be affirmed.

Affirmed.

Burke, P. J., and Kilby, J., concur.