author: Mr. Justice Biess

text:
    Grace Seaborn and Delma Mink, Appellees, v. Herbert A. Miller et al., Defendants. Myrtle S. Miller et al., Appellants.
    Gen. No. 9,410.

      Heard in this court at the October term, 1943.
    Opinion filed March 14, 1944.
    Frank J. Harrison, of Streator, for appellants.
    Barry Mumfobd, of Pittsfield, for appellees.
   Mr. Justice Biess

delivered the opinion of the court.

Two of the Defendants, Plerbert A. Miller and Myrtle S. Miller, his wife, have appealed from a decree of foreclosure of a real estate mortgage lien on premises described in the mortgage and complaint, which mortgage was executed and delivered by said defendants on August 5,1941 to the Farmers Bank of Baylis, Baylis, Illinois, as mortgagee, to secure the payment of four promissory notes described therein, which were drawn by said mortgagors payable to the order of mortgagee, with 6 per cent interest per annum from date until paid. The notes and mortgage, copies whereof were attached to the complaint, were alleged to have been duly assigned on September 13, 1941 without recourse to and acquired by the original plaintiff, E. E. Seaborn, since deceased, as assignee, for a consideration of $6,294.29, and his interests were alleged to have since passed to the substituted plaintiffs Grace Seaborn and Delma Mink, appellees as owners and legal holders thereof. The amount found and adjudged to be due as principal, interest and solicitors’ fees on three unpaid notes and certain defaulted general taxes and special assessments which were paid by the plaintiff was $6,204.29. A sale of the mortgaged premises, subject to defendants’ statutory right of redemption was ordered by the chancellor in default of payment of said amount together with costs of suit by defendant mortgagors, for the reversal of which orders and decree an appeal to this court was perfected.

The complaint, which was filed on July 11, 1942, alleged the execution and delivery of the above promissory notes and mortgage on August 5, 1941, in the respective principal amounts of $500; $1,000; $1,500 and $3,294.29, which $500 note was alleged to have been subsequently paid by said defendants on December 20, 1941, leaving unpaid the principal sums of the three remaining notes, aggregating $5,794.29, together with accrued interest thereon, solicitors’ fees and the certain general taxes and special drainage liens and assessments paid by plaintiff as set forth in the amendment to the complaint filed on August 10, 1942, ■ being an aggregate amount of $6,696.90 so alleged to be due the plaintiff.

Defendants were ruled to plead to the complaint, and in default thereof a decree pro confesso was entered against them and the cause was referred to the master in chancery on August 17, 1942 for proofs, findings, conclusions and recommendations as to form of decree. Thereafter, on September 29, 1942, on verified motions of defendants, the order of reference was set aside and defendants were granted leave and ordered to file answers instanter. The answer so filed by Defendant Herbert A. Miller, the fee simple owner of the mortgaged premises, admitted execution and delivery to said bank of all the notes and mortgage in question but denied the amount of the indebtedness to be as alleged and averred that the same did not exceed $4,000; denied plaintiff’s ownership of the notes and mortgage and disclaimed knowledge as to assignment thereof to the plaintiffs; averred that defendants had agreed with L. T. Graham, one of plaintiff’s original attorneys and president of said bank, that said notes were to be executed for the amount of gross funds loaned and advanced for the payment of a judgment and liens for defaulted taxes, interest, and claims for liens chargeable against said lands; admits the payment of the $500 mortgage note due on January 1, 1942, and avers that the above notes and mortgage were executed and delivered in excess of the amount originally contemplated and agreed upon with said Graham and further avers that defendants believe that the Plaintiff Seaborn had no personal financial interest in said notes and mortgage and no authority to elect and exercise an option to declare the whole amount of said indebtedness to be due and pay-. able, or to file suit therefor.

No counterclaim nor prayer for affirmative relief was filed or set forth in the answer. No averments of fraud nor allegations concerning breach of the alleged agreement with Graham or of any duty on his part in the premises is alleged. The remaining defendants were tenants on the mortgaged premises and did not join in the appeal.

Plaintiffs’ reply denied any alleged contract or agreement with Graham as averred and realleged ownership and right of recovery of the unpaid balance due on the mortgage indebtedness as set forth in the' amended complaint and to a decree for equitable relief as prayed therein.

While the cause was pending before the master, a motion by the defendants to require the plaintiff and his agents to produce for defendants’ inspection in the office of the master in chancery all books, records, files and memoranda pertaining to the mortgage indebtedness was denied by the chancellor.

■ It also appears that after some delay, following notices to defendants’ counsel to file objections before the master to his proposed report, which delay defendants’ counsel alleged to have been due to lack of time to consult with associate counsel and prepare the same, the master’s report was filed with the court. Defendants then filed objections to the report and asked a second order of re-reference, which was denied. The master’s report was subsequently approved and the decree was entered.

The defendants appellants allege prejudicial and reversible error in the action of the court in denying the above mentioned motions; in finding that when the suit was instituted and heard, the Plaintiff Seaborn was the owner of said notes and mortgage and contended that such finding was against the manifest weight of the evidence; error in finding the amount due the plaintiff on mortgage indebtedness to be $5,794.29, as contrary to the manifest weight of the evidence and error in entering the decree in favor of the plaintiff.

Concerning the alleged error in overruling defendants’ motion to require that all papers relating to the alleged mortgage indebtedness in the possession of plaintiff or any of his agents be produced for inspection, a sound discretion in relation thereto is lodged in the court and unless some description or reasonable degree of certainty as to the papers to be produced and the apparent materiality and necessity for their production is shown, the court may in the proper exercise of its discretion under the statute cited deny such motion. (Sec. 9, ch. 51, par. 9, Ill. Rev. Stat. 1943 [Jones Ill. Stats. Ann. 107.074].) Only an abuse of such discretion justifies a reversal. Section 9 of the Evidence Act, supra, provides that “The several courts shall have power in any action pending before them, upon motion, and good and sufficient cause shown, and reasonable notice thereof given, to require the parties, or either of them, to produce books or writings in their possession or power which contain evidence pertinent to the issue.” Before an order can be issued under this act there must be good and sufficient cause shown upon reasonable notice and that the evidence sought to be obtained is pertinent to the issues in the case. Red Star Laboratories Co. v. Pabst, 359 Ill. 451, 453, 194 N. E. 734. From the record, it does not appear that any material evidence sought by the defendants which was admissible under the pleadings was thereby improperly or prejudicially suppressed or made unavailable to the defendants. The matter of the alleged agreement and transactions between defendants and witness L. T. Graham appear fully in the direct and cross-examination of witnesses and the material records in relation to such transactions were subsequently admitted in evidence. It does not appear that the defendants were in any way prejudiced in presenting their defense by the ruling of the court in relation to said motion.

As to the alleged error of the court in its refusal to again refer the cause to the master for filing objections to the latter’s report, it appears that reasonable opportunity had been afforded the defendants to present or file such objections prior to filing of the master’s report and we do not deem the alleged reasons for failure to file the same on account of insufficient notice or opportunity to be valid. From the record, it appears that the defendants were negligent and dilatory in filing their motions and pleas and that even after default and decree pro confesso had been entered against them under the original complaint, the court in the liberal exercise of its discretion, had set the same aside and permitted the defendants to answer and to fully present their defenses 'before the master. All that is required of the master is that reasonable notice and opportunity be given to file the objections to his report. Although said objections and motions were subsequently filed with and stricken or overruled by the court, the defendants were not harmed thereby. We find nothing substantial under the facts or as questions of law that has not been preserved for review in the record which could in any way have prejudiced the rights of said defendants by denial of the motion. Ordinarily, in the exercise of his sound discretion, a chancellor will grant a motion for re-reference of a cause to permit the parties to file objections to the master’s report in the absence of negligent failure to file the same in apt time and upon good cause shown. It was not, however, an abuse of discretion to deny the motion under the circumstances disclosed by the record and no harmful or prejudicial effect to the defendants appears from such ruling. Matthews v. Whitethorn, 220 Ill. 36, 77 N. E. 89; Strickland v. Washington Bldg. Corp., 287 Ill. App. 340, 4 N. E. (2d) 973. Where no objections or exceptions are filed to the master’s report, the findings of fact of the master are conclusive as against a party, who has the right, but does not object in apt time to the master’s report. Postel v. Eagist, 251 Ill. App. 454, 459; Johnson v. Voudrie, 233 Ill. App. 572; Singer, Nimick & Co. v. Steele, 125 Ill. 426; Gehrke v. Gehrke, 190 Ill. 166; Barney v. Lincoln Park Board of Com’rs, 203 Ill. 397.

Concerning the amount of the alleged indebtedness, the conversations had between Attorney Gfraham and Defendant Miller as to the Sny Island Levee Drainage judgment for delinquent assessments, tax liens and other claims included in the amounts of the original notes, there is a conflict between the testimony of said Graham and Miller in relation thereto, and the defendants assert that the finding of the master as approved by the court is contrary to the manifest weight of the evidence. When the record is carefully read, we cannot so hold, but believe that the probative value of .their respective statements in such controversy was a factual matter to be properly determined by the master and chancellor below, not to be disturbed by this court unless contrary to the manifest weight of the evidence. Day v. Wright, 233 Ill. 218, 222, 84 N. E. 226. The amounts involved and referred to were extensively discussed between Attorney Graham and Defendant Miller on several different days prior to the time the notes and mortgage were given. The respective contentions as to the gross amounts so due clearly appear in the record. Defendant insisted that the same amounted to less than that contended for by Attorney Graham who was then the president of the Farmers Bank of Baylis. The bank president refused to make the loan on other conditions than those to which the defendant finally acceded under facts and circumstances wherein it appears from plaintiffs’ proofs that both parties were fully advised of their respective claims and the amount so finally agreed upon was merged in and set forth in the four notes, which were given and signed by the defendants. The mortgage was given to secure the payment of the aggregate sum so determined which became merged in the papers themselves. It is properly contended by plaintiffs that the defendants cannot now disclaim or dispute the same in the absence of fraud. On December 20, 1941, the first mortgage note of $500 was voluntarily paid by the defendant and the present suit is on the remaining notes. It may be kept in mind also that no allegation of fraud appears in the record. To be availed of as a defense, fraud, like all other affirmative defenses, must be plainly set forth in the answer and must be proven. (Subpar. 4, sec. 43, Civil Practice Act, sec. 167, ch. 110, Ill. Rev. Stat. 1943 [Jones Ill. Stats. Ann. 104.043].) It is a well recognized rule of law that fraud is never to be presupposed, but must be established by convincing proof and by the greater weight of the evidence. Beery v. Hurd, 295 Ill. App. 124, 14 N. E. (2d) 656; American Hoist & Derrick Co. v. Hall, 208 Ill. 597, 601, 70 N. E. 581. However, no fraud having been so alleged and proven, the contentions that the said notes and mortgage were given or said transactions made under fraudulent circumstances are without merit and need not be further considered by this court.

Further objection is made to the allowance of a solicitors’ fee to the plaintiff under the provisions of the notes and mortgage, predicated upon the alleged ground that the Graham firm was interested and that Graham senior and Plaintiff Seaborn had 'been and were engaged in a number of mutual business transactions extending over many years, including the one in question in which the said attorney was an interested party. It appears that subsequent to the filing of the original complaint and the answer thereto by defendants’ counsel, other counsel were engaged by Plaintiff Seaborn who continued to represent the plaintiff as well as the substituted plaintiffs as their counsel of record in the conduct of the mortgage foreclosure proceedings and that such services were the usual, ordinary and necessary services performed in the conduct of such litigation; that the amount of such solicitors’ fees was agreed upon and included in the original notes and contracts and that the court did not err in allowing solicitors’ fees to the plaintiff assignee’s for such necessary services so performed by said attorneys. We deem the allowance thereof, under the circumstances disclosed by the record, to have been, proper.

The ownership of the securities by Plaintiff Seaborn is brought into the question. There is substantial proof in the record that he advanced and paid to the mortgagees the full amount of the mortgage indebtedness in order to acquire the same and that said securities were duly indorsed to him without recourse; that he subsequently paid the amount of delinquent general taxes and drainage instalment assessments which were in arrears and necessarily paid in order to protect his mortgage lien under the terms thereof. It thus appearing from a preponderance of the evidence that he acquired the same in good faith and for said valuable consideration, he was entirely within his rights in enforcing the mortgage lien and indebtedness against defendants’ real estate in accordance with the terms of the mortgage. It is further provided that in the event of default in the payment of any of the indebtedness due under the terms of the mortgage, the legal owner and holder thereof may declare the entire amount of the debt to be due and bring suit therefor. This was done by the plaintiff, acting within the express terms of the contract contained in the notes and mortgage and we find no force in defendants’ contention to the contrary: The chancellor below did not err in entering the decree of foreclosure and in providing that upon default in the payment of the amount therein found and decreed to remain due and unpaid from the defendants to the plaintiffs, the mortgaged premises be sold to satisfy the amount of said indebtedness and costs of the proceeding.

We find no reversible error in the record and the decree of the circuit court of Pike county is affirmed.

Decree affirmed.


source: Caselaw Access Project

author: Mr. Presiding Justice Friend

license: Public Domain

text:
    Bessie S. Mudge et al., Appellants, v. Mitchell Hutchins and Company, Inc. et al., Appellees.
    Gen. No. 38,549.
    Heard in the second division of this court for the first district at the December term, 1935.
    Opinion filed April 6, 1944.
    Richard A. Bierdemann, of Chicago, and Gillespie, Burke & Gillespie, of Springfield, for appellants.

      Gardner, Carton & Douglas, of Chicago, for appellees ; Henry A. Gardner, Erwin W. Roemer and William L. Fay, all of Chicago, of counsel.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

On September 25, 1931 plaintiffs Bessie S. Mudge, Anna Mudge and Hugh U. Mudge, filed a bill in equity against Mitchell Hutchins and Company, Inc., and the individual defendants who by succession continued the stock brokerage and investment business of the corporation as copartners doing business as Mitchell Hutch-ins and Company, seeking an accounting for the alleged conversion of certain shares of the capital stock of the New York Trust Company which belonged to the estate of their mother, of which they were beneficiaries. After issue was joined, the cause was submitted to the chancellor upon a lengthy stipulation of facts, and a decree was entered dismissing the bill of complaint for want of equity, from which plaintiffs have taken an appeal.

The case was docketed in the Appellate Court for the December term 1935. Thereafter by stipulation of the parties, appellants were granted numerous extensions of time for filing their abstracts and briefs over a period of more than seven years, pending the outcome of certain other litigation in the Federal courts, and in June 1943 after all briefs had been filed, the cause was ordered placed on the oral argument calendar and argued on March 14, 1944.

From the salient stipulated facts it appears that under a trust agreement dated March 4,1920 Arwilda M. Mudge, the mother of plaintiffs, conveyed to her son, Burton M. Mudge, as trustee, certain securities in trust which included two stock certificates aggregating 68 shares of the capital stock of the' Liberty National Bank of New York. Pursuant to a merger, that stock was later exchanged for 68 shares of stock of the New York Trust Company. It is for the alleged conversion of these shares that this suit was filed.

The trust agreement of March 4, 1920 (hereinafter referred to as the first trust) provided that the income should be divided into four equal parts, one of which was to be paid to Mrs. Mudge, the settlor, and the remaining three parts, one each to her sons, Charles, George and Hugh; that upon the death of Mrs. Mudge, the trust was to terminate and the assets were to be turned over to the executor named in her will. She reserved the right to revoke the agreement during her lifetime, and if not terminated or revoked it was to be automatically terminated upon her death. Shortly after her death on March 30, 1927, her son Charles died in Cook county, Illinois, on July 24, 1927, leaving him surviving as his sole heirs the plaintiff Bessie Mudge, his widow, and John Henry Mudge, his minor son. By his will Bessie Mudge was named executrix thereunder, as well as the sole legatee. The estate has been administered and the executrix discharged. Upon oral argument the recent death of Bessie S. Mudge was suggested, and an order was entered that Harriet Long, as executrix, and John Henry Long, her sole heirs at law, should be substituted as parties appellant in lieu of Bessie S. Mudge, deceased. In October 1929 George Paul Mudge, another son of Arwilda Mudge, died in the State of Missouri, leaving him surviving his widow Anna Mudge, one of the plaintiffs herein, and two minor children,' Wallace and Arwilda Mudge. His will was admitted to probate in Jackson county, Missouri, and it appearing that the assets of the estate did not exceed the amount to which the widow was entitled by law, the executor was discharged. Shortly thereafter in March 1930 Wallace, the minor son of George Paul, died, leaving his mother and his sister as the only heirs at law.

On October 22, 1921 Mrs. Mudge-entered into a second trust agreement "with her son Burton Mudge. That agreement made no mention of the first trust, but all the securities deposited under the first agreement, including the 68 shares of the Liberty National Bank stock, were deposited under the second trust. The terms of holding, investment and distribution in the second trust agreement were identical with those contained in the first, but in the second agreement a different successor trustee was named.

It was in March 1921, just prior to the execution of the second trust agreement, that the Liberty National Bank merged with the New York Trust Company, and in due time a certificate for 68 shares of the new stock of the New York Trust Company was issued in the name of ‘ ‘ Burton Mudge as Trustee under trust agreement between Arwilda M. Mudge and Burton Mudge, dated March 4, 1920,” but this certificate was not received by Burton Mudge until some time in November 1921, and in the meantime the second trust agreement of October 22, 1921 had been executed. Upon the receipt of the certificate in November 1921, Burton Mudge, the trustee, did not have it changed into his name as trustee under the second trust agreement, but retained it in his name as trustee under the first trust.

Mrs. Mudge died March 30,1927, and by her will Burton Mudge was named as executor without bond. She left her surviving her four sons. Her will' was admitted to probate in Cook county, Illinois, and Burton Mudge, after qualifying as executor thereof, filed his inventory in the probate court, listing therein all the property which came into his possession as trustee, including the 68 shares of the capital stock of the New York Trust Company. After the death of Charles Mudge, his widow Bessie Mudge raised the question whether Mrs. Mudge had set up a trust under her will or whether the assets of the estate passed under the residuary clause. Burton Mudge as executor thereupon filed a bill in the superior court on November 3, 1928, asking for a construction of the will, and some two years later an agreement was reached between the parties and a decree entered by the court finding that when Mrs. Mudge died, Burton Mudge did not have in his possession or control any part of her estate which had been delivered to him as trustee under the agreement of March 4, 1920, and that Burton Mudge, Hugh Mudge, Bessie Mudge as sole legatee under the last will of her husband Charles, and Anna Mudge as residuary legatee under the last will of George Paul Mudge, were each the owner of one-fourth part of the estate under the residuary clause contained in the will.

It appears from the stipulated facts that after the execution of the first trust Burton Mudge, desiring under the broad powers vested in him as trustee “to hold, manage, control, sell, transfer, deliver; pledge, mortgage and encumber any part or all of the property comprising the trust, and to invest and reinvest the moneys of the trust and to sell, collect, alter or change the investments of the trust,” sold securities held by him as trustee and invested and reinvested the proceeds in other property consisting of shares of stock, bonds and other securities; and it was evidently part of the plan of administration of the trust estate that securities be held in the individual name of the trustee, because from the stipulated facts it appears that ‘ ‘ said Burton Mudge from time to time, in order to more conveniently handle the properties that he held as trustee, in making sales as authorized and investing and reinvesting the funds of said estate in accordance with said powers, caused to be transferred to his own name personally securities held by tnm as trustee,” and that ‘ among the last of the securities to be transferred to Burton Mudge individually, in accordance with this plan of operating the trust estate, was the certificate for sixty-eight (68) shares of stock of the New York Trust Company.” Defendants’ counsel argue that the settlor of the trusts and the testatrix from whom plaintiffs derive their claim, must have acquiesced in the action of her trusted son Burton Mudge in holding trust securities in his individual name, because from the very establishment of the trust some of the securities were so held, and at the time of the execution of the second trust agreement some of the trust securities were held in Burton Mudge’s name individually and no change whatever was made in the possession of such certificates or securities or in the names appearing in those documents as the owners thereof. Whether Mrs. Mudge, the settlor, and the testatrix from whom plaintiffs derive their claim, acquiesced in the action of Burton Mudge in holding trust securities in his individual name, as defendants contend, is not disclosed of record, but it is a fair assumption that she did in view of the broad powers vested in the trustee, the stipulated facts with respect to the plan of administration of the trust estate, and the circumstance that at the time of the execution of the second trust some of the trust securities were held in Burton Mudge’s name individually and no change whatever was made in the possession of such certificates or securities or in the names appearing on those documents as the owners thereof.

In November 1927 after his mother’s death, Burton Mudge as trustee indorsed the stock certificate in question to himself individually and delivered it to the defendants with the request that they guarantee his signature and send it to the New York Trust Company, for transfer by that corporation. Defendants stamped the indorsement ‘‘Signature guaranteed,” and forwarded the certificate to Kidder Peabody and Company, their New York correspondents, for delivery to the New York Trust Company. Kidder Peabody and Company also indorsed the certificate “Signature guaranteed,” and delivered it to the New York Trust Company for transfer on its books. The defendants were not at that timé members of the New York stock exchange, and their guarantee of Mudge’s signature was not a warranty of Ms authority or capacity under the rules of that exchange. Therefore upon receiving the certificate, the New York Trust Company refused to transfer it on the signature of Mudge, as guaranteed, and demanded proof of Mudge’s power to transfer the stock. Nothing occurred thereafter for substantially a year and until the fall of 1928, when Burton, Mudge, Jr., who happened to be in New York on other business, consulted the officers of the New York Trust Company at his father’s request, and was told it would be necessary to produce a certified copy of the trust indenture of March 4, 1920, under which the stock was registered as being held. Not until March 1929 did Burton Mudge procure a copy of the trust indenture certified to by his attorneys, or take any steps toward securing a transfer of the bank stock. On March 21, 1929 he delivered to defendants the certified copy of the trust indenture, together with a letter bearing the same date, asking that the same be forwarded to the New York Trust Company in order that the stock might be transferred, saying that he wanted the transfer made in order “to simplify the handling of these shares when it is desired to sell them or part of them. In their present form it is difficult to readily sell or transfer them. Under the terms of the Trust Agreement, no one is required to see to the application of the proceeds and I have the right to invest and reinvest the proceeds of sale of securities.” Mudge’s action at that time appears to have been prompted by the fact that in March 1929 the capital stock of the New York Trust Company was changed from $100 to $25 par value, and warrants were issued to stockholders giving them the right to purchase additional shares. This is borne out by the fact that he inclosed with his letter warrants for 54 and 2/5 shares and requested defendants to purchase three-fifths additional rights, so that he could purchase 55 new shares. Defendants thereupon forwarded the copy of the trust indenture to Kidder Peabody and inclosed Mudge’s letter of explanation without comment. The old certificate for 68 shares was then in New York. Subsequently on April 5, 1929 after the New York Trust Company had received the certified copy of the trust indenture and the old certificate from Kidder Peabody and Company, together with a subscription for additional shares, on advice of its counsel, who had reviewed the powers of the trustee, it transferred the old certificate and issued to Burton Mudge individually four certificates for 75 shares each and one for 27 shares of the new stock. A week later defendants delivered the four 75-share certificates to Burton Mudge, and at his request sold for his account the 27 shares, the proceeds from which were deposited in a bank account carried in the name of Burton Mudge, trustee. During the months of June and July following, Burton Mudge removed the four stock certificates from the safety deposit box which he carried under the name of Burton Mudge, trustee, and pledged them with the Boulevard Bridge Bank of Chicago to secure the indebtedness of corporations owned and controlled by him. Plaintiffs learned of the withdrawal and use of the New York Trust Company stock by Mudge for his own purpose about the middle of March 1930, but it was not until early in August 1931 that any demand was made upon defendants in accordance with the claims set forth in this proceeding. That was the first notice which defendants had of Burton Mudge’s breach of trust. Prior to that time they had never been informed of the fact that the original trust of 1920 had been superseded by one executed in 1921, or of the death of Mrs. Mudge, and no circumstances had come to their attention which in any way indicated that Burton Mudge was misusing trust properties for his personal benefit. Throughout the matters connected with the transfer of the stock by the New York Trust Company, defendants had acted without any profit to themselves.

As applicable to the foregoing facts, plaintiffs take the position that when defendants assisted the trustee in having the certificate transferred to himself individually by guaranteeing his signature on the assignment thereof and forwarding the certificate to New York for. transfer, with notice that the stock of the New York Trust Company had been issued in the name of the trustee and the warning and legal implications arising from that fact, they participated in the transfer, conversion and breach of the trust and became just as liable as the person who actually made the transfer and as the trustee who converted the money, regardless of the fact that their motives were honest and that they received no benefits from the transaction. The question presented' is one of first impression in this State, and in the absence of any decisions on the precise -question, plaintiffs are forced to rely largely on so-called bank cases where trust-funds were deposited and credited to the individual account of the trustee and used by Mm for his own purposes under circumstances indicating that the bank, with full knowledge of the breach of trust, facilitated the conversion of trust funds by the trustee, and thereby became a participator in the conversion. They say that “the case at bar is to be decided under the Illinois law, not the English law, and the two Illinois cases cited [Massachusetts Bonding Co. v. Standard Bank, 334 Ill. 494; State Bank and Trust Co. v. Commercial Trust and Savings Bank, 300 Ill. App. 435] are ample authority, particularly where defendants cite none. ’ ’

In the Massachusetts Bonding Co. case, one Joyner was appointed receiver of the Midland Casualty Company by the circuit court of Cook county. As such receiver he opened an account with the Standard Bank and from time to time deposited therein receiversMp funds. He ultimately defaulted in his accounts in the approximate sum of $33,000 and absconded. In compliance with an order of the court, Massachusetts Bonding Company, as surety, paid the amount of his defalcations, and by decree of that court was subrogated to the rights of the Chicago Title and Trust Company, which had been appointed receiver as Joyner’s successor. The theory of the bill to establish the liability of the bank was that Joyner drew checks against his account in favor of the bank in payment of his personal obligations to it and for his own personal use, which the bank paid with knowledge of the facts. The evidence adduced upon the hearing clearly indicated that the bank actually paid out trust funds with notice that they were being misappropriated; it accepted payments on Joyner’s personal indebtedness to it out of the receiver’s funds, growing out of stock transactions with a local brokerage firm on his own account, with the knowledge of one Miles, a bank official, who was Joyner’s nephew, and certainly knew that the receiver was misappropriating trust funds.. Under these circumstances, the court held that the bank not only aided Joyner in his defalcations and participated therein with full knowledge that he was committing breaches of trust, but actually benefited thereby.

A similar conclusion was reached in the recent case of State Bank & Trust Co. v. Commercial Trust & Savings Bank, 300 Ill. App. 435, wherein the bank permitted the Evanston town collector, one Rogers, who was also an officer of the bank, to transfer town funds to his individual account and then allowed him to exhaust the account for his personal use. In a divided opinion the court approved the well-established principle that when a bank knowingly permits the misappropriation of trust funds deposited by a public official, it becomes equally liable with the derelict trustee, but Mr. Justice O’Connor, dissenting, pointed out what he considered the harshness of the conclusion reached by the majority, and distinguished the Massachusetts Bonding Co. case on the ground that there was the greatest irregularity on the part of the officers of the bank as well as the receiver.

Notwithstanding their apparent willingness to rest their case on the foregoing Illinois decisions, plaintiffs also cite and rely on several cases in other States. In Duckett v. National Mechanics’ Bank, 86 Md. 400, 38 Atl. 983, the bank was held liable for the misappropriation of the proceeds of one cheek because it violated specific instructions on the face of the check to deposit funds “to the credit of Henry W. Clagett, trustee.” In reaching its conclusion the court said that “This liability of the bank depends, however, altogether upon the contingency that it knowingly aided the trustee, Clagett, to commit the default of which he was undeniably guilty. If without knowledge of Clagett’s misconduct, or if without sufficient notice to put it on inquiry that would have enabled it to ascertain that Clagett was mingling with his individual deposits and using as his own, money that the bank knew or had the means of knowing was trust money; or if it was merely the innocent agency through which, without fault or negligence on its part, Claggett depleted the trust estate, then it was not guilty of aiding him in misappropriating the trust fund and is not liable to restore it.” In a later Maryland decision, All v. McComas, 162 Md. 690, 161 Atl. 187, demurrers were sustained to bills seeking to hold purchasers of trust property liable for participation in a breach of trust because they made out checks to an executor in his individual name without characterizing him as executor or trustee. Plaintiff in that proceeding relied upon the Duckett case and upon Safe Deposit & Trust Co. v. Cahn, 102 Md. 530, 62 Atl. 819, also cited by plaintiffs herein, contending that defendants had facilitated a misappropriation of trust funds by the executor. The court held that the demurrers were properly sustained because there was no allegation that defendants had any knowledge of the contemplated misuse of the funds, and concluded that “With no charge of bad faith on the part of the- appellees [defendants] and none that they were on notice of the' intended misuse of funds tby the executor and trustee with whom they dealt, and no failure of duty by them, we think the action of the chancellor in sustaining the demurrers in these cases was proper.”

In Jennie Clarkson Home v. Missouri, K. & T. Ry. Co., 182 N. Y. 47, another of plaintiffs’ citations, a broker, one Gibson, who was held liable, advised the wrongdoer, Lessels, how to obtain the information to secure a transfer of registered bonds he had stolen and actually assisted in the preparation of a fraudulent power of attorney. Gibson was a member of the stock exchange and acting under its rules guaranteed the authority of Lessels, as treasurer of' the plaintiff, to transfer the bonds, then forwarded the papers, together with a purported corporate resolution which, on its face, showed irregularity, to the railroad company, which made the bonds payable to bearer, and also sold the bonds and handed the proceeds over to Lessels, thus" clearly converting the plaintiff’s securities.

The mere giiarantee of the trustee’s signature by defendants in the case at bar was certainly in no way comparable to the conduct of the banks and individuals who were charged with liability in the foregoing cases. To be sure, defendants had notice that the stock had been given in trust, but they had no knowledge of the trustee’s intention to misappropriate trust funds. In the so-called bank cases, notice that there is a trust is given a bank when a depositor presents a check payable to himself “as trustee” and asks that it be placed to his individual credit or account; nevertheless, if a bank complies with the request and places trust funds in the trustee’s personal account, it incurs no liability from that fact alone, and unless it has notice that the trustee is improperly using the funds for his own purposes the bank is not liable. In all the cases called to our attention, liability was predicated on other circumstances, known to the bank, indicating that the trustee was committing a breach of trust; and the rule of liability (which requires that other circumstances, known to the bank, must exist) is clearly set forth in the Restatement of the Law of Trusts, sec. 324, comment d, as follows: “Although the bank knows that the funds deposited are trust funds, and the deposit is made in the name of the trustee personally, the bank is not bound to make inquiry whether the trustee is committing a breach of trust in making the deposit; and although the deposit is made in breach of trust, the bank in receiving the deposit is not liable for participation in the breach of trust, in the absence of further circumstances known to the bank indicating that the trustee is committing a breach of trust.” In his exhaustive work on Trusts and Trustees, sec. 908, Professor Bogert summarizes the results of the bank decisions, and supports by citation of authority what appears to be the general rule in most jurisdictions, including Illinois, as follows: “It frequently happens that paper which runs to ‘T, as trustee,’ is offered by the trustee for credit to his personal bank account. Assuming that the form of the paper puts the bank on notice that the paper is trust property, is the bank put on inquiry as to the power of the trustee to deposit it in his personal account? Is the bank a participator in a breach of trust if it credits the private account as directed, and thereby the trustee is enabled to apply the trust funds to his own benefit?

“If one can imagine a case where the bank has actual notice that the object of the credit to the private account was to facilitate the stealing of the trust funds by the trustee, it would obviously be a participator in a breach if it permitted the trust paper to be credited to the private account. Or if the bank is instructed to place trust paper to the trust account, and in violation of instructions credits it to the private account of the trustee, the bank may well be liable to the cestuis. [Citing the Duckett case.]

“But if there is no actual notice of impending breach to be accomplished by such a transaction, and no notice of suspicious circumstances, outside the form of the paper and deposit slip, which makes it dishonest not to inquire, it is generally held that the bank which permits cash or paper known to be trust property, or labeled with a trust label, to be credited to the personal account of the trustee, is not put upon inquiry and is not a participator in a breach by that act alone.

“While, as shown previously, it is bad practice for a trustee to carry trust credit in his personal bank account, and, if the bank fails, the trustee will be a guarantor of the safety of funds so held, it is not deemed by the courts a breach of trust or such a suspicious circumstance as to put a duty on the bank to investigate. The courts feel that the bank is entitled to believe that the trustee will check the trust credit out of the personal account for trust purposes, and that he is merely guilty of careless or unbusinesslike methods of handling the trust 'property and not of dishonest practices. It is the judicial opinion also that to require the bank to investigate such a transaction would put a burden on the bank for which it is not paid by the trust, and would clog the handling of commercial paper in a way which would be a disadvantage to the business community.”

Plaintiffs say that their “entire case is built upon the theory that defendants’ guaranty of the trustee’s signature on the stock certificate with knowledge that he intended to have a new certificate issued in his individual name, was not only instrumental in bringing about the transfer, but was entirely responsible therefor, because without such guaranty stock certificates can not be transferred,” and they carry the argument further by asserting that “not only did the defendants guarantee the trustee’s signature, but they forwarded to New York a certified copy of the trust agreement which had terminated by the death of Mrs. Mudge, and by so doing, led the New York Trust Company to believe that the trust agreement was still in existence and the settlor still alive. Certainly when the New York Trust Company called for a certified copy of the trust agreement, they were not calling for a trust agreement that was no longer in existence, but were calling for the document that would show the authority vested in the trustee. Thus, the defendants’ acts which were so instrumental in bringing about the transfer were the guarantee of the trustee’s signature and the forwarding of the trust agreement to the New York Trust Company.” As heretofore indicated, the stipulated facts clearly show that prior to August 1931, when demand was made upon them in accordance with the claims set forth in this proceeding, defendants had never been informed of the fact that the original trust of 1920 had been superseded by one executed in 1921, or of the death of Mrs. Mudge. Moreover, the trust agreement forwarded by defendants to the New York Trust Company was furnished by the trustee’s attorneys, and from all that appears of record they were justified in assuming that it was the only instrument in existence and that Mrs. Mudge was still living. We find no authority for the contention that it was incumbent on them to conduct an independent investigation. When the guaranteed certificate and the trust agreement ultimately reached the New York Trust Company, it made an inspection of the document and on the advice of counsel effected the transfer upon its own responsibility. With that decision defendants had nothing to do. In forwarding the indenture defendants merely acted as a conduit. They did not, as plaintiffs contend, say, in effect, to the New York Trust Company that they could be sure the trust was still in force, or anything to like effect; their guarantee, given in 1927, was simply that the trustee’s signature was genuine, and the guarantee was based upon their knowledge of his indorsement and not upon the certified copy of the trust indenture which no one saw until March 1929. As we view it, the ultimate question presented is whether the conduct of defendants, admittedly in good faith, amounts to' such participation in a breach of trust as to render them liable to plaintiffs. We think they were not liable becanse their acts were not the effective cause of any loss to plaintiffs and did not constitute a conversion of plaintiffs’ property. It is a salutary rule to hold a trustee sharply accountable for his wrongful conduct. It is quite another thing to make third persons who deal with trustees in good faith liable for losses which they in no way cause.

Subsequent to the transactions here involved, the Illinois legislature adopted the Uniform Fiduciaries Act in July 1931. Section 9 of that act (Ill. Rev. Stat. 1943, ch. 98, par. 242 [Jones Ill. Stats. Ann. 135.14]) provides: “Deposit in fiduciary’s personal account.] If a fiduciary makes a deposit in a bank to his personal credit of checks drawn by him upon an account in his own name as fiduciary, or of checks payable to him as fiduciary, or of checks drawn by him upon an account in the name of his principal if he is empowered to draw checks thereon, or of checks payable to his principal and indorsed by him, if he is empowered to indorse such checks, or if he otherwise makes a deposit of funds held by him as fiduciary, the bank receiving such deposit is not bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary; and the bank is authorized to pay the amount of the deposit ór any part thereof upon the personal check of the fiduciary without being liable to the principal, unless the bank receives the deposit or pays the check with actual knowledge, that the fiduciary is committing a breach of his obligation as fiduciary in making such deposit or in drawing such check, or with knowledge of such facts that its action in receiving the deposit or paying the check amounts to bad faith.” Although that statute is not retroactive, it now represents the settled public policy of this State and establishes rules as to constructive notice of breaches of fiduciary obligations. Section 3 of the act which deals with stock transfers, was designed, in the words of the New York Law Revision Commission, “to expedite the transfer of securities by fiduciaries with title, relieving trust estates from delay resulting from the rule imposing a stringent duty of investigation upon corporations registering transfers.” (See Stark v. National City Bank, 278 N. Y. 388, at p. 401.)

Section 3 (par. 236) of the Uniform Law [Jones Ill. Stats. Ann. 135.08] reads: “Registration of transfer of securities held by fiduciaries.] If a fiduciary in whose name are registered any shares of stock, bonds or other securities of any corporation, public or private, or company or other association, or of any trust, transfers the same, such corporation or company or other association, or any of the managers of the trust, or its or their transfer agent, is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in making the transfer, or to see to the performance of the fiduciary obligation, and is liable for registering such transfer only where registration of the transfer is made with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in making the transfer, or with knowledge of such facts that the action in registering the transfer amounts to had faith.” Obviously, if the transfer of stock in the case at bar had occurred in 1931, after the passage of the Illinois statute, instead of in 1929, the question of liability would not have arisen because it must be conceded that both the New York Trust Company and defendants acted in good faith and without any actual notice of any breach of trust on the part of the trustee; and although the statute is not retroactive, it nevertheless furnishes guiding principles and an expression of policy for a decision of the controversy here presented. Moreover, under the common law of England, which is the basis of the law of Illinois, the rule was that a corporation whose shares were held by a trustee, was not bound to inquire as to the powers of the trustee to transfer the shares, and no liability attached to a corporation for registering a transfer from a trustee without inquiry, even though the transfer was, in fact, in breach of trust. Hartga v. Bank of England, 3 Ves. Jr. 55; Bank of England v. Parsons, 5 Yes. 665; In re Perkins, 24 Q. B. D. 613. Defendants call our attention to the fact that in Stark v. National City Bank, 278 N. Y. 388, the New York Court of Appeals adopted this precise line of reasoning and reversed an opinion of the Appellate division, which had held the bank liable for participating in the exchange of Bancitaly Corporation and Bank of Italy stock for shares of Transamerica Corporation by an administratrix in 1929. The shares were part of an estate but were unauthorized investments under the New York law. Although the Uniform Fiduciaries Act was not adopted in New York until eight years later and although, unlike the Illinois statute, the New York act expressly provided that it did not apply to transactions prior to its adoption, the court referred to the English authorities and to the reasons underlying the enactment, and after quoting section 3 of the act, said: “The statute, though not retroactive, is a legislative declaration of a public policy. We need not, however, resort to it in this case. Here there is not only absence of actual knowledge by the defendants that the fiduciary contemplated a wrong to the estate but also absence of notice or of constructive knowledge of any wrong. . . . • In the absence of bad faith on their part they are not responsible for loss caused to the estate by misuse of the stock thereafter by the administratrix.”

For the reasons stated, we have reached the conclusion that it would be inequitable to hold the defendants liable; the effect of such a decision would not only create difficulties and handicaps in the administration of trust estates but would go “to the very verge of justice in making good to cestuis que trust the consequences of the breaches of trust of their trustees at the expense of persons perfectly honest, but who have been, in some more or less degree, injudicious. ’ ’ (Barnes v. Addy, L. R. 9 Ch. App. 244, quoted with approval in Scott on Trusts, sec. 327, vol. III, p. 1777.) We think the chancellor properly dismissed the bill for want of equity, and the order is therefore affirmed.

Order affirmed.

Scanlan and Sullivah, JJ., concur.


text:
    Stanley Sauvage and Marie Sauvage, Appellees, v. Oscar W. Hedstrom Corporation, Appellant.
    Gen. No. 42,754.

      Heard in the second division of this court for' the first district at the October term, 1943.
    Opinion filed April 6, 1944.
    Rehearing denied April 20, 1944.
    Dillard B. Baker, of Chicago, for appellant.
    Maurice Weissman, of Chicago, for appellees.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

On July 15, 1942 plaintiffs entered into a written indenture of lease with Oscar W. Hedstrom Corporation for premises located at 1906-1908 1ST. Cieéro avenue, Chicago, for the period commencing August 1, 1942 and ending July 31, 1943 “and thereafter for the duration of the war,” at a stipulated rental of $125 a month. The demised premises consisted of a one-story building with a garage in the rear thereof equipped “for light manufacturing and assembling” and included all machinery tools and office furniture necessary for that purpose. Defendant entered into possession August 1, 1942 and paid its rental until March 1943. February 16, 1943 it sent plaintiffs an invoice for heating the garage in the rear of the premises, which had been expressly excepted from the lease, for the months of November and1 December 1942 and January and February 1943, and also for rentals for that portion of the building claimed to have been occupied by plaintiffs for the months of August, September, October, November and December 1942 and January and February 1943, aggregating $625. Bent for March 1943 was not paid by defendant, but it claims to have credited plaintiffs’ account in the sum of $125 on the purported indebtedness on which defendant had previously billed plaintiffs for heating, etc. After the March rent became due, plaintiffs brought forcible entry and detainer in the municipal court and had judgment for possession of the premises, from which defendant has taken an appeal.

After plaintiffs had filed their statement of claim alleging that they were entitled to possession of the premises, defendant filed its appearance, answer and affidavit of defense, wherein it denied any breach or default, and set up a counterclaim which averred, in substance, that after it had on February 16, 1943 forwarded to plaintiffs its invoice for heating the garage, etc., together with a letter requesting payment, the invoice was retained by plaintiffs without comment or objection, making an account stated between the parties, on which plaintiffs became indebted to defendant in excess of the rent due for March; and that accordingly when the March 1943 rent became due, defendant credited plaintiffs ’ account in the sum of $125 for that month. .

Upon trial of the cause defendant sought to prove that- plaintiffs were indebted to it in the sum of $625, which was in excess of the March 1943 rental, by reason of the fact that the itemized invoice, having been retained without comment or objection, became an account stated, and that according to the law of custom and usage it was proper to credit plaintiffs’ account with the sum of $125, due for the month of March. However, the court refused to permit defendant to introduce evidence of the counterclaim, and overruled its contention with respect to the account stated upon the theory that the only issue involved was whether default had been made in the payment of rent for the month of March 1943 and whether by reason of such default plaintiffs were entitled to possession of the premises.

There is substantially no dispute as to the facts. It must be conceded that the rent for March 1943 was not paid in cash or by check. The lease makes no provision whatsoever for heating the garage in the rear of the premises, which was expressly excepted. If defendant heated the garage it was purely gratuitous, and if it is entitled to any compensation for that service, such claim would be entirely outside the provisions of the' lease and the subject matter of another .suit. Plaintiffs did not join in their demand1 for possession any request for a judgment for the March rent, and no such judgment was entered. The sole question therefore presented is whether in an action of forcible entry and detainer, defendant may interpose a counterclaim for money due and owing as against a claim for possession of the premises based upon a default in rent for which the suit was brought.

The law is well settled that the action of forcible entry and detainer involves solely the question of the right to possession of the leased premises. Woodbury v. Ryel, 128 Ill. App. 459; Van Winkle v. Weston, 276 Ill. App. 66 (citing Chicago Railway Equipment Co. v. Wilson, 250 Ill. App. 231). The rule laid down in these decisions has been consistently followed in this State.

It is also well settled in Illinois that in actions of forcible entry and detainer, no cross-demand in the nature of recoupment can be interposed by way of defense. Geiger v. Brown, 167 Ill. App. 534 (citing Mark v. Schumann Piano Co., 105 Ill. App. 490, aff’d in 208 Ill. 282). The principle laid down in the Geiger case was followed in Truman v. Bodesch, 168 Ill. App. 304, wherein Woodbury v. Ryel and other cases were cited.

Defendant filed no reply brief and consequently did not challenge or discuss the decisions supporting the foregoing rules of law. It rested its case on the contention that it should have been allowed to introduce evidence showing custom and usage and an account stated, on the theory that the law favors crediting of mutual accounts instead of multiplicity of actions, and its counsel says that such evidence would have disclosed that defendant was not indebted to plaintiffs at and prior to the maturing of the March 1943 rental because plaintiffs owed defendant a sum equal to or in excess of $125, for which plaintiffs had previously been billed and to which they offered no objection. However, on oral argument defendant’s counsel, for the first time, suggested that under amendments to the Civil Practice Act, enacted in 1935, defendant was entitled to set off its claim against plaintiffs in any action, including forcible entry and detainer, and supplemental briefs were filed by both parties, by leave of court, for the purpose of presenting that point and demonstrating, as defendant contended, that the well settled rules enunciated in the cases hereinabove cited, with respect to counterclaim in forcible detainer suits, had been outmoded by provisions of the Civil Practice Act and rules governing it.

An analysis of the statute and rules of court applicable thereto, does not support defendant’s contention. Section 1, ch. 110, Ill. Rev. Stat. 1943 [Jones Ill. Stats. Ann. 104.001], prescribes that “The provisions of this Act shall apply to all civil proceedings, both at law and in equity, unless.their application is otherwise herein expressly limited, in courts of record, except in attachment, ejectment, eminent domain, forcible entry and Retainer . . . or in other actions in which the procedure is regulated by special statutes. As to all matters not regulated by statute or rule of court, the practice at common law and in equity shall prevail.” Section 31 of the act, prescribing the forms of action, provides in paragraph 2 thereof that “Proceedings in attachment, ejectment, eminent domain, forcible entry and detainer ... or other actions in which the procedure is regulated by special statutes, shall be in accordance with the statutes dealing therewith.” Supplementing the foregoing provisions of the act, the Supreme Court of Illinois, by its Rule 2 of Practice and Procedure, effective November 25, 1941, provides that “In the actions referred to by section 1 and subsection (2) of section 31 of the Civil Practice Act, the separate statutes shall control, to the extent to which they regulate procedure in such actions, but the Civil Practice Act shall apply to matters of procedure not so regulated by separate statutes.”

Defendant takes the position that section 38 of the Practice Act affords authority for the contention that a set-off may be pleaded by defendant as a cross-demand in any action, and when so pleaded, shall be called a counterclaim. Section 38 (1) provides that “Subject to rules, any demand by one or more defendants against one or more plaintiffs, or against one or more co-defendants, whether in the nature of set-off, recoupment, cross-bill in equity or otherwise, and whether in tort or in contract, for liquidated or unliquidated damages, or for other relief, may be pleaded as a cross-demand in any action, and when so pleaded shall be called a counterclaim. (2) The counterclaim shall be a part of the answer, and shall be designated as a counterclaim. (3) Every counterclaim shall be pleaded in the same manner and with the same particularity as a complaint, and shall be complete in itself, but allegations set forth in other parts of the answer may be incorporated by specific reference instead of being repeated.” Section 38 must, of course, be read in connection with the entire act, and the provision that a set-off may be pleaded “as a cross-demand in any action” is limited by the provisions of section 1 and subsection 2 of section 31 to matters of procedure not regulated by special statutes, which would exclude actions in forcible detainer. Under a note in section 264, chapter 109 of Jones Illinois Statutes Annotated 1935, at the bottom of page 419, the author raises the question whether the decisions heretofore cited “before the advent of the Civil Practice Act,” are still applicable to forcible entry and detainer proceedings ‘ ‘ in view of ’ ’ sections 1 and 31 of the act and ‘ in spite of” Supreme Court Eule 2, but reaches no conclusion on the matter. The provisions of section 1 and subsection 2 of section 31 are clear and explicit, as is Eule 2 of the Supreme Court; they expressly exclude forcible entry and detainer, among other actions, from the provisions of the Civil Practice Act; and the broad provisions of section 38, which permit the filing of a counterclaim “in any action,” presumably refer to any action within the provisions of the act.

Counsel cites First Nat. Bank of Chicago v. Bohnhorst, 305 Ill. App. 251, and Wainscott v. Penikoff, 287 Ill. App. 78, as supporting the contention that the Civil Practice Act applies to actions of forcible entry and detainer. In the Bohnhorst case the court invoked sec. 11, ch. 57, Ill. Rev. Stat. [Jones Ill. Stats. Ann. 109.271] (Forcible Entry and Detainer) as authority for the statement that “the Civil Practice Act was made to apply to actions of forcible entry and detainer,” and cites Wainscott v. Penikoff as authority. In the Wainscott case defendant appealed from a summary judgment entered against him in a forcible detainer action. The only question involved was whether the provisions of the Practice Act with respect to summary judgment could be invoked in forcible entry and detainer proceedings, and the court held that section 57 of the Civil Practice Act [Jones Ill. Stats. Ann. 104.057] pertaining to summary judgments provides that, subject to rules, if the plaintiff “in any action to recover possession of land . . . shall file an affidavit ... of the truth of the facts upon which his complaint is based . . . the court shall, upon plaintiff’s motion, enter a judgment in his favor for the relief so demanded.” Defendant there argued that the foregoing provision of section 57 authorizing summary judgments was intended to apply only to actions of ejectment, but the court held that under the provisions of that section summary judgments could be taken in forcible entry and detainer proceedings where the supporting affidavits were proper and sufficient. The question whether a counterclaim can be filed in an action of forcible entry and detainer, contrary to the law and established rule preceding the adoption of the Civil Practice Act, is not involved in either the Bohnhorst or Wainscott cases, and defendant’s counsel cites no decision which would warrant us in holding that the rule heretofore consistently followed has been outmoded by recent legislation.

Plaintiffs ask for statutory damages on the theory that the appeal was frivolous and taken solely for delay. We find no justification for this contention, and the request is therefore denied.

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

Judgment affirmed.

Scanlan and Sullivan, JJ., concur.


author: Mb. Justice Scanlan

text:
    John H. Chatz, Trustee, Appellant, v. Edward I. Bloom et al., Defendants. Edward I. Bloom, Appellee.
    Gen. No. 42,363.
    Heard in the second division of this court for the first district at the October term, 1942.
    Opinion filed April 6, 1944.

      William S. Kleinman, of Chicago, for appellant.
    Thomas C. McConnell, of Chicago, for appellee.
   Mb. Justice Scanlan

delivered the opinion of the court.

Plaintiff, as Trustee in Bankruptcy of the Estate of John W. Hight, pending in the District Court of the United States for the Northern District of Illinois, Eastern Division, appeals from a final order entered in the Circuit court of Cook county sustaining the motion of defendant Edward I. Bloom to strike plaintiff’s amended complaint and dismissing the suit as to said defendant. Plaintiff appeals.

The suit as originally filed is an action at law and in equity against several defendants and consists of four counts. Count I is an action at law and relates only to defendant Edward I. Bloom, while in the other three counts equitable relief was sought against the remaining defendants. Counts I and IA of the amended complaint relate solely to defendant Bloom and this appeal concerns only the action against said defendant.

Count I of the amended complaint alleges, in substance, that on August 26, 1937, John W. Hight filed his voluntary petition for adjudication in bankruptcy in the United States District Court, at Chicago, 'and that he was adjudicated a bankrupt on the same day; that shortly thereafter, at the first meeting of creditors, plaintiff was duly elected the trustee of the bankrupt’s estate, and he qualified by filing his bond as required by law, and is still acting as such trustee; that pursuant to the Federal Bankruptcy Act, this right of action belongs to and is vested in him as such Trustee; that for several years prior to the filing of his said petition in bankruptcy, the bankrupt had been duly licensed and was regularly engaged in the business of selling life insurance in Illinois; that in August, 1935, he took applications from defendant Edward I. Bloom for the purchase by said defendant of ordinary life insurance on his life, in the total principal sum of $100,000, of which $50,000 was purchased from The Mutual Life Insurance Co. of New York, and $50,000 was purchased from the New England Mutual Life Insurance Co. of Boston, Massachusetts; that the respective insurance policies were issued during* September and October, 1935; that at the time the respective applications were placed by the defendant with the bankrupt, they entered into an unlawful and fraudulent agreement which provided that the bankrupt would rebate and pay over to the defendant one-half of the earned initial commissions which the bankrupt would receive from the insurance companies, on the sale of said policies; that in addition thereto, it was agreed that the bankrupt would rebate and pay over to defendant all of the renewal commissions to be subsequently earned by the bankrupt, on premiums which said defendant would thereafter pay on said insurance policies; that these arrangements and agreements were illegal and void, against public policy, and contrary to the statute of Illinois, and were likewise contrary to the statutes of the States of New York and Massachusetts, where said respective insurance policies were issued; that the first year’s premiums on the policies issued to defendant by The Mutual Life Insurance Company of New York amounted to $3,342, and the bankrupt’s earned initial commission thereon of 55%, was $1,838.10; that the first year is premiums on the policies issued to defendant by the New England Mutual Life Insurance Company of Boston, amounted to $3,210, of which the bankrupt’s earned initial commission thereon of 50% amounted to $1,605; that defendant paid the premiums on all of said policies on or about October 21, 1935, on which date the bankrupt received payment of the aforesaid respective commissions, and on the same day the bankrupt paid over to defendant the sum of $1,721, representing one-half of said earned commissions, which payment was made pursuant to said unlawful and fraudulent agreement ; that on November 14, 1936, the bankrupt paid over to defendant the total sum of $411.15 as illegal and fraudulent rebates of the first year’s renewal commissions earned by the bankrupt on renewal premiums paid by defendant on said policies; that the amount sued for is the total sum of $2,132.70, with statutory interest.

Count IA of the amended complaint alleges that said sum of $2,132.70 was paid over by the bankrupt to defendant without any legal, valid or actual consideration therefor, and is therefore recoverable by plaintiff as trustee of said bankruptcy estate.

Defendant’s motion to strike the amended complaint avers, in substance, that plaintiff’s rights are derivative and no greater or different than the rights of the bankrupt, and that plaintiff cannot assert in this suit any greater or different rights than the bankrupt had or has; that the illegal arrangement had been fully executed, and that at the time that the rebate payments alleged in the complaint were made the bankrupt and defendant Bloom were acting illegally and in pari delicto and therefore plaintiff cannot maintain his action ; that as to count IA defendant avers that to permit a recovery by plaintiff would be against the public policy of the State of Illinois; that the provisions of the Federal Bankrupty Act are inapplicable to plaintiff’s right to maintain his action. Defendant further avers that there was a consideration and justification for such rebating because of the purchase by him from the bankrupt of the said insurance policies.

Plaintiff contends that his amended complaint sets out a proper and substantial cause of action; that his power to maintain this action is inherent in his duties and title as Trustee in bankruptcy; that his authority to proceed in a plenary action to reclaim property fraudulently or illegally transferred by the bankrupt, is clearly established by the Federal Bankruptcy Act; that plaintiff’s title to the money sought to be recovered and consequently his right to enforce this action are superior to the right which existed in the bankrupt; that as a matter of public policy, the defendant’s attempt to avoid liability for repayment by invoicing the rule of pari delicto, would not be maintained in an action between the immediate parties to this illegal transaction, more particularly is this true in a suit by a Trustee in bankruptcy of the transferor; that public policy and established law sustain plaintiff’s right to recover in this action

Defendant contends: “I. Granting that the Trustee has the rights of a judgment lien creditor, the bankruptcy law does not vest in him any greater right than that possessed by the bankrupt to recover money paid out by the bankrupt almost two years prior to the bankruptcy at a time when the bankrupt must be déemed to be solvent.” “II. The rebating agreement between the bankrupt and the defendant was executed, and the parties being equally at fault, neither a court of equity or of law will lend its powers or process in aid of either party, but will leave them exactly where it finds them.” “III. There is no rule of public policy in the State of Illinois which is sufficient to negative the rule of pari delicto applicable to the present action.”

Plantiff contends that “The Federal Bankruptcy Act vested title to all of the bankrupt’s property in plaintiff as the Trustee in bankruptcy thereof, as of the date of the bankruptcy. In addition thereto the Federal Bankruptcy Act vested in him all of the rights of a judgment lien creditor in respect to money theretofore illegally transferred or wrongfully paid out by the bankrupt, in order to thus enable plaintiff to make recovery thereof.” This contention is a meritorious one. Section 110 (a), 11 U. S. C. 1940 ed. (the Federal Bankruptcy Act), p. 663, reads as follows:

“The trustee of the estate of a bankrupt and his successor or successors, if any, upon his or their appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt as of. the date of the filing of the petition in bankruptcy or of the original petition proposing an arrangement or plan under this title, except insofar as it is to property which is held to be exempt, to all . . . (4) Property transferred by him in fraud of his creditors ’ ’;

Section 110 (c) of the same Act reads as follows (p. 664) :

“The trustee may have the benefit of all defenses available to the bankrupt as against third persons, including statutes of limitation, statutes of frauds, usury, and other personal defenses; and a waiver of any such defense by the bankrupt after bankruptcy shall not bind the trustee. The trustee, as to all property in the possession or under the control of the bankrupt at the date of bankruptcy or otherwise coming into the possession of the bankruptcy court, shall be deemed vested as of the date of bankruptcy with all the rights, remedies, and powers of a creditor then holding a lien thereon by legal or equitable proceedings, whether or not such a creditor actually exists; and, as to all other property, the trustee shall be deemed vested as of the date of bankruptcy with all the rights, remedies, and powers of a judgment creditor then holding an execution duly returned unsatisfied, whether or not such a creditor actually exists.” (Italics ours.)

The obvious purpose for investing the trustee with the “rights, remedies, and powers” of a judgment creditor is to prevent such defenses as are asserted by the instant defendant. The contention of defendant that “plaintiff’s rights are derivative and no greater or different than the rights of the bankrupt, and that plaintiff can assert in this suit no greater or different rights than the bankrupt had or has, ’ ’ is answered by Section 110 (c), and adversely to defendant’s contention. Section 110 (e) of the Act reads as follows (p. 664):

“ (1) A transfer made or suffered or obligation incurred by a debtor adjudged a bankrupt under this title which, under any Federal or State law applicable thereto, is fraudulent as against or voidable for any other reason by any creditor of the debtor, having a claim provable under this title, shall be null and void as against the trustee of such debtor.
“(2) All property of the debtor affected by any such transfer shall be and remain a part of his assets and estate, discharged and released from such transfer and shall pass to, and every such transfer or obligation shall be avoided by, the trustee for the benefit of the estate. The trustee shall reclaim and recover such property or collect its value from and avoid such transfer or obligation against whomever may hold or have received it, except a person as to whom the transfer or obligation specified in paragraph (1) of this subdivision e is valid under applicable Federal or State laws.”

As plaintiff argues, his right under the foregoing section to institute the instant proceeding, is not merely permissive; it is a statutory mandate to proceed.

Plaintiff’s contention that, “the rebating agreement between the bankrupt and the defendant having been entered into and consummated in violation of statutory prohibitions, such violation established a cause' of action against the defendant for repayment of the money thus received,” is also a meritorious one. When the rebating agreement was entered into and, consummated in 1935, par. 252, ch. 73, Ill. Rev. Stat. 1933 and 1935, provided:

“An Act to prohibit certain practices and prevent unjust discrimination of and by life insurance carriers doing business in this State and to repeal an Act therein named. (Approved July 10, 1933.)
“252. Discrimination, rebate of premium prohibited — Penalty.] Sec. 1. The term ‘life insurance carrier’ whenever used in this Act shall be held to include life insurance companies and associations.
“No life insurance carrier doing business in this State shall make or permit any distinction or discrimination in favor of" individuals among insurants of the same class and equal expectation of life in the amount of payment of premiums or rates charged for policies of insurance, or any dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes.
“No life insurance carrier doing business in this State, or any oEcer, agent, general agent, employe, representative or broker thereof, or any other person, shall pay, allow or give or offer to pay, allow or give, directly or indirectly, as an inducement to insurance, nor shall any person, co-partnership or corporation knowingly receive as such inducement to insurance, any rebate of premium or any part thereof, payable on any policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatsoever, or give or receive, sell or purchase, or offer to give or receive, sell or purchase, as an inducement to insurance or in connection therewith, any stock, bonds, or other obligations or securities, of any insurance company or other corporation, association, partnership or individual, or any dividends or profits to accrue thereon, or any paid employment or contract for services of any kind, or anything of value, nor shall any carrier doing business in this State, nor any employe, agent, general agent, oficer, representative or broker thereof, give or offer to' give or enter into any separate agreement promising to secure as an inducement or consideration for insurance a loan of any money on real estate or other property, either directly or indirectly, or any contract for services.
“No person, co-partnership, or corporation shall receive or accept from any life insurance carrier, officer, agent, general agent, representative or broker, or any other person, any such rebate of premium or any part thereof, payable on a policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement not specified in the policy of insurance.”

Upon the enactment of the Insurance Code of 1937 the above statute was, in substance, readopted. See sec. 151, par. 763, and sec. 152, par. 764, ch. 73, Ill. Rev. Stat. 1941 [Jones Ill. Stats. Ann. 66.826 and 66.827], The instant contention of plaintiff appears to raise a proposition of law of first impression in this State, although these statutory prohibitions of rebating of insurance premiums have been in effect as part of the Insurance Act of this State since 1891. Plaintiff calls attention to the fact that the complaint alleges not only the violation of the statute of Illinois prohibiting rebates but it further alleges that the conduct of the bankrupt and defendant was likewise prohibited by the statutes of New York and Massachusetts, in which States the respective insurance policies were issued. Plaintiff cites sec. 89, ch. 30, Cahill’s Consolidated Laws of New York, which reads as follows:

“No life insurance corporation doing business in this state shall make or permit any discrimination between individuals of the same class or of equal expectation of life, in the amount or payment or return of premiums or rates charged for policies of insurance, including endowment policies, and annuity contracts, or in the dividends or other benefits payable thereon, or in any of the terms and conditions of the policy; nor shall any such company permit or agent thereof offer or make any contract of insurance, endowment policy or annuity contract, or agreement as to such contracts other than as plainly expressed in the policy issued thereon; nor shall any such company or any officer, agent, solicitor or representative thereof pay, allow or give, or offer to pay, allow or give, directly or indirectly, as inducement to any person to insure, or give, sell or purchase, or offer to give, sell or purchase as such inducement or in connection with such insurance, endowment policy, or annuity contract, any stocks, bonds or other securities of any insurance company or other corporation, association or partnership, or any dividends or profits accruing thereon, or any valuable consideration or inducement whatever not specified in the policy. ...”

Plaintiff cites Equitable Trust Co. v. Newman, 72 Misc. 52, 129 N. Y. S. 259, where the court refused to enforce an obligation which arose out of an insurance rebating agreement, declaring such agreement void, and held that the penalty provision of the statute was not an exclusive remedy for such violation. To quote from the opinion (pp. 261, 26.2):

“The respondent claims that, even if the instrument was not negotiable, proof that the agent agreed to give the defendant a rebate of $234 would constitute no defense as between the original parties. At the time the letter was signed and the contract was made rebating was forbidden under section 89 of the insurance law. That section did not in terms declare a contract for a rebate void, but the act of giving rebates was made a misdemeanor by chapter 282 of the Laws of 1889, now section 1191 of the Penal Law, and the courts should not enforce a contract which is not only forbidden by the statute, but which constitutes a penal offense. Section 89 does not, as claimed, provide a specific penalty for giving a rebate, which should be considered exclusive. It simply provides the manner in which the Superintendent of Insurance may restrain future disobedience. The agent could not enforce the contract, and his assignee takes subject to all the defenses against him,”

Plaintiff also cites the Massachusetts statute prohibiting rebating, secs. 120, 182, 183, ch. 175, Annotated Laws of Massachusetts, which provide, inter alia:

“Section 120 — No life company and no officer or agent thereof shall make or permit any distinction or discrimination in favor of individuals between insurants of the same class and equal expectation of life in the amount or payment of premiums or rates charged for policies of life or endowment insurance, or annuity or pure endowment contracts, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes.
“Section 182 — No company, no officer or agent thereof and no insurance broker shall pay or allow, or offer to pay or allow, in connection with placing or negotiating any policy of insurance or any annuity or pure endowment contract or the continuance or renewal thereof, any valuable consideration or inducement not specified in the policy or contract, or any special favor or advantage in the dividends or other benefits to accrue thereon; or shall give, sell or purchase, or offer to give, sell or purchase, anything of value whatsoever not specified in the policy; or shall give, sell, negotiate, deliver, issue, or authorize to issue, or offer to give, sell, negotiate, deliver, issue, or authorize to issue any policy of workmen’s compensation insurance, or any motor vehicle liability bond, or any motor vehicle liability policy, both as defined in Section 34 A of Chapter 90, at a rate different from that fixed, established or approved by the commissioner. No such company, officer, agent or broker shall at any time pay or allow, or offer to pay or allow, any rebate of any premium paid or payable on any policy of insurance or any annuity or pure endowment contract.
“Section 183 — No person shall receive or accept from any company or officer or agent thereof, or any insurance broker, or any other person, any such rebate of premium paid or payable on the policy or contract, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement not specified in the policy or contract or any policy of workmen’s compensation insurance, or any motor vehicle liability bond or any motor vehicle liability policy, both as defined in section 34 A of Chapter 90, át a rate different from that fixed, established or approved by the commissioner. ...” '

Plaintiff cites Parrot v. G. H. Mansfield & Co., 266 Mass. 121, where the court says (p. 124):

‘ ‘ The plaintiff agreed with the defendant to sell for it five hundred shares of the preferred- stock of the defendant corporation for $100 a share. He was to receive therefor a commission of ten per cent on all shares sold before July 1, 1927.' On May 19, 1927, the • president of the defendant company, Frank W. Mansfield, asked the plaintiff to release the defendant from the contract and told him if he would do this ‘the defendant would take fifty thousand ($50,000) dollars life insurance upon the life of the president of the defendant company for the benefit of the said company. ’ Thereupon the plaintiff executed a release of the contract to sell the stock, and on the same day the president of the defendant company, through the plaintiff, who was an insurance broker, applied for $50,000 life insurance in the Sun Life Assurance Company, Ltd., of Montreal, signed the application, and was examined and accepted. The policy was issued on the life of Mansfield payable to his estate, and by him assigned to the defendant. The plaintiff tendered the policy to the defendant and the company refused to accept it. The authority of Mansfield to act for the defendant in the transaction was admitted. There was no reference in the policy to the release of the defendant, by the plaintiff, of the contract to sell the stock. The action is in contract to recover the commission the plaintiff would have received as an insurance broker if the defendant had accepted the policy.”

Continuing on pages 125 and 126, the court said’:

“The defendant contends that the transaction was in violation of G-. L. c. 175, Sections 182, 183, as amended by St. 1925, c. 346, Sections 5, 6, respectively. So far as material to the issue involved these sections provide, in effect, that no insurance broker ‘ shall pay or allow, or offer to pay or allow, in connection with placing or negotiating any policy, of insurance . . . any valuable consideration or inducement not specified in the policy ... or any special favor or advantage in the dividends or other benefits to accrue thereon; or shall give, sell or purchase, or offer to give, sell or purchase, anything of value whatsoever not specified in the policy . . . . No . . . broker shall at any time pay or allow, or offer to pay or allow, any rebate of any premium’; and under section six of the statute, ‘No person shall receive or accept from . . . any insurance broker’ any rebate of premium or any special favor or advantage in the dividends ‘or other benefits to accrue thereon,' or any valuable consideration or inducement not specified in the policy.’
" . . .
“. . . The plaintiff had a contract with the defendant to sell its stock. He was to be paid a commission of ten per cent on all shares sold by him before July 1, 1927. While this contract was in existence, he agreed with Mansfield to release the defendant from all liability thereon if Mansfield took out insurance on his life through the plaintiff in the sum of $50,000 for the company’s benefit. The release by the plaintiff of the defendant’s obligation to pay him for selling its stock was the entire consideration for the agreement by Mansfield to take the policy of insurance. The two transactions were not separate and distinct, they were bound together. The fact that the plaintiff released the defendant from the stock contract before the policy was issued is not important. The two agreements were contemporaneous; one was the consideration of the other. Such a transaction in the opinion of the majority of the court is contrary to the statute. It is, in effect, a payment or allowance by the broker in negotiating a policy of insurance of a consideration or inducement ‘not specified in the policy.’ This was the thing prohibited by the statute. The agreement was to result in a ‘valuable consideration or inducement not specified in the policy.’ It was for the defendant’s benefit and was an evil the statute was intended to remedy. By being relieved of the obligation to pay the plaintiff a commission under the stock contract the defendant received a benefit and advantage over other applicants for insurance. It was a discrimination in its favor and violated the purpose and intent of the statute.”

The foregoing case seems to be in point. It necessarily follows that if such rebating agreements are illegal and unenforceable the instant defendant, having received this money from the bankrupt under such illegal agreement, should not be permitted to retain it as against the rights of a creditor or of the trustee of the estate of the bankrupt.

Plaintiff contends that the pari delicto rule, relied . upon by defendant, is inapplicable to the instant action; that public policy requires that the right of plaintiff as trustee in bankruptcy to recover the money rebated to defendant, should be sustained; that even had this action been instituted by the insurance broker to recover the money paid out by him under the illegal rebating agreement, the court would have permitted him to recover on the basis of public policy, and cites as authority 13 C. J. 497, 498, where it is stated:

“Although the parties are in pari delicto, yet the court may interfere and grant relief at the suit of one of them, where public policy requires its intervention, even though the result may be that a benefit will be derived by a plaintiff who is in equal guilt with defendant. But here the guilt of the parties is not considered as equal to the higher right of the public, and the guilty party to whom the relief is granted is simply the instrument by which the public is served. But ‘ courts are and should be cautious in affording relief to a fraudulent debtor or other violator of the law under this exception, and should act only where it is evident that some greater public good can be subserved by action than by inaction.’ ” (See, also, Rideout v. Mars, 99 Miss. 199, 202, 203, 204.)

We have given careful attention to the principles of law urged by defendant in support of the trial court’s action, but we are satisfied that they do not control the instant claim of the trustee in bankruptcy. Defendant relies strongly upon the pari delicto rule and cites cases that follow that rule. But that rule cannot be urged against a suit of a trustee in bankruptcy in view of the provisions of the Bankruptcy Act, to which we have heretofore referred.

“. . . It is also quite clear that, if both the parties to the transfer had made it with the intention to defraud third parties, the law would give relief to neither as against the other. The complainant, as trustee, however, represents not only the bankrupt, alleged to be a party to the fraud, but his creditors, who are innocent, and he may assert on their account rights against Sugerman, which the bankrupt could not.” (Thomas v. Sugerman, 157 Fed. 669, 670.)

“Now it is fundamental in law that a debtor cannot himself avoid his own fraudulent transfer, this being so because the fraudulent transfer gives a good title against him and no court will listen to his plea for declaring it null ñor let him so stultify himself as to say he transferred the property fraudulently and now wants it back. So it is only creditors who can avoid fraudulent transfers, although in a qualified sense the debtor still has the title.” (4 Remington on Bankruptcy (4th Ed.) 72.)

Nor is there any merit in the contention of defendant that the trustee stands in the bankrupt’s shoes. In 4 Remington on Bankruptcy (4th Ed.) 80, the author states:

“Manifestly, the trustee has a broader title and more rights than the receiver in bankruptcy, who is, in general, a mere custodian having only the title of possession or right of possession.”

The same author states, p. 68, sec. 1403:

“The statute, in sec. 70 (a), U. S. C. title 11, sec. 110, declares that the title taken by the trustee is the title the bankrupt had; but this clause must be read in conjunction with other sections of the statute and with two other parts of the same section, otherwise a wholly insufficient idea of the complete title and rights of the trustee will be had. It is true the title which the trustee takes is that of the bankrupt. But his rights are those of the bankrupt and more. He has, by the positive provisions of the Act, the further rights which any creditor had by State law at the time of the bankruptcy, to set aside fraudulent transfers or liens and1 to expose the resultant title of the bankrupt.”

The same author states (p. 69):

“In addition thereto he has the special rights conferred by the bankruptcy law itself in protection of the insolvent estate and its preservation as a fund for the benefit of all creditors, namely, the peculiar rights of avoiding preferential transfers and liens obtained by legal proceedings within the four months preceding the bankruptcy.
“'That the trustee’s rights are not, and never have been, restricted to those of the bankrupt will become evident as the subject is developed. Indeed, had it not been so, the Bankruptcy Act would have been a menace to the commercial community instead of a safeguard of it; for upon bankruptcy the remedies available to creditors are suspended and are superseded, with certain exceptions, by those available to the trustee. Thus (except in certain exceptional circumstances) the creditors may no longer pursue the debtor’s property in their own right; therefore, it would have been most disastrous had the trustee not been given the right to continue the pursuit of it in the ways that were being availed of by creditors at the time of bankruptcy.”

The same author states (p. 74):

“It is doubtless true that the trustee’s title since the Amendment of 1910 is the most extensive and complete of any in jurisprudence.
“It also must be borne in mind that the Amendment of 1910, by placing the trustee in the position of an execution creditor with a levy on the property in his custody and with an unsatisfied execution on the property not in his custody, gives him more than the rights which any creditor might have chanced already to have asserted. It gives him, in addition thereto, all rights which would have been obtainable by creditors under State law had the trustee been an officer holding an execution or equitable process in behalf of all creditors. This right is not a right derived from existing creditors. It is not a transfer from any creditor by operation of law of that creditor’s existing lien or levy, as seems to have been held in one case. It is a right derived from the statute itself conferring upon the trustee the attributes of a creditor ‘ armed with process.’ ” (See, also, Gross v. Grossman, 2 F. (2d) 458, 460; Campbell v. Calcasieu Nat. Bank, 12 F. (2d) 981, 983.)

It seems hardly necessary to state that our ruling in' the instant case has no legal effect upon the validity of the insurance policies in question.

The judgment order of the Circuit court of Cook county is reversed and the cause is remanded with directions to the trial court to overrule defendant’s motion to strike and to enter a rule on defendant to answer plaintiff’s amended complaint.

Judgment order reversed and cause remanded with directions.

Feiend, P. J., and Svllivan, J., concur.