author: Mr. Presiding Justice Friend

text:
    Mary A. Scully et al., Appellees, v. John De Met et al., Appellants.
    Gen. No. 42,479.
    Opinion filed May 2, 1944.
    Zimmerman & Norman, of Chicago, for certain appellants ; Edward A. Zimmerman and William R. Engelhardt, both of Chicago, of counsel.
    Reuel H. Grunewald, of Chicago, for certain other appellant; Francis M. Cooper, of Chicago, of counsel.
    Maurice Alschuler, of Chicago, for appellees.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

In an action brought by plaintiffs to enforce claims arising under the Illinois Securities Law (ch. 32, pars. 254 et seq., Ill. Rev. Stat. 1935), defendants suffered adverse summary judgments aggregating $1,680.75, from which they have taken an appeal.

There is no dispute as. to the salient facts, disclosed by the pleadings and numerous supporting affidavits. De Met’s, Inc., was incorporated under the laws of Delaware in 1929 and contemporaneously therewith 132,000 of the total 135,000 shares of common stock were placed in a voting trust. The defendants John and Nicholas De Met received some 20,000 voting trust certificates representing their minority interest in the corporation as of 1929, and continued to hold these securities as their individual property until 1936, when about 15,000 shares were sold to the public through E. J. Koeppe and Company, licensed brokers, including an aggregate of 240 shares sold to plaintiffs, who subsequently learned that the stock was not qualified under the Securities Law, tendered the stock to the sellers, demanded the return of their money, which was refused, and then brought suit to recover the purchase price.

The corporation had also issued its preferred stock, which was listed on the Chicago stock exchange and in 1936 had a market value of $25 a share. Plaintiffs were the owners of preferred stock in various denominations. In the early summer of 1936 John and Nicholas De Met appointed Koeppe to sell their common stock and agreed that he should receive as compensation for his services “any amount in excess of $4,375 per share.” One of Koeppe’s salesmen prevailed upon plaintiffs to sell their preferred stock and purchase voting trust certificates representing the common stock for the amount realized from the sale. Defendants contend that these transactions constituted an exchange of securities, but the facts disclosed by the supporting affidavits reveal that it was not treated as an exchange but rather as an out and out sale of the “senior” security and the purchase of the “junior.” The sales price for all the common stocks sold to plaintiffs was $7 a share, netting the broker a profit of $2,625 a share on 240 shares. The voting trust certificates had no fixed market value and therefore constituted Class “D” securities, which were not registered under the Securities Law.

The sole question therefore presented by the respective motions of plaintiffs and defendants for summary judgments is whether the sales fall within the exemption of section 5, paragraph 258 of the act, which provides: “Securities in Class ‘B,’ being exempted sales, shall include: (1) The sale in good faith and with no intent to defraud of any security by or on behalf of a vendor who is not an issuer, or underwriter thereof, or a dealer or broker, and who, being a bona fide owner of such security, disposes of his own property for Ms own account and such sale is not made directly or indirectly, for the benefit of the issuer or an underwriter of such security, or for the direct or indirect promotion of any scheme or enterprise with the intent of violating or evading any provisions of this Act.” It is argued that under the foregoing quoted exemption of the act, an individual owner may sell his own securities either through his own efforts or through the efforts of another acting for him, without violating the statute, and that upon the construction sought the court should have entered summary judgment for defendants instead of plaintiffs. The trial judge was of the opinion, and counsel for both parties concede, that under the exemptions of section 5 defendants, as individuals, could themselves have sold their entire blocks of common stock to any person or persons desiring to purchase them, but held that the sales of these securities to various individuals through a licensed broker was a violation of the Securities Law, for which plaintiffs were entitled to recover the purchase price upon tendering the stock to the seller.

Prior to 1933 section 5 exempted only an isolated transaction, and the precise question for determination is whether the statute as amended, authorized the holders of corporate stock, unqualified under the act, to distribute it through licensed brokers for commissions to be paid to them, and to employ the usual methods of public offerings of securities. No cases touching upon the precise question are cited by either counsel, and we know of none where the matter has been discussed or adjudicated. However, it is apparent from the early decisions that the so-called “Blue Sky Law” was enacted to protect the unwary and those easily beguiled, and as plaintiffs’ counsel points out, shares of stock offered generally on the market by a regularly licensed broker to the public at large imbue prospective purchasers with confidence and inspire credulity that the securities are qualified for distribution under the Securities Law. The public was the concern of the legislature, not the owner of the securities, and it was for the protection of the public that the law was enacted. Various Supreme Court decisions in this state have emphasized this primary purpose of the statute, which is again repeated in Stewart v. Brady, 300 Ill. 425, as follows: “The object of the law is to protect the public from the dishonesty, incompetence, ignorance and irresponsibility of persons engaged in the business of disposing of securities of uncertain value whereby the inexperienced and confiding are likely to suffer loss. ’ ’

Defendants rely principally on that part of section 5 which provides that the securities exempted from the application of the act shall include any security sold “by or on behalf of a vendor who is not an issuer, or underwriter thereof, or a dealer or broker, and who, being a bona fide owner of such security, disposes of his own property for his own account,” and their counsel argue that a licensed broker may act on behalf of a vendor in selling his own securities without rendering himself liable to the penalties of the statute. We have no precedent to guide us in the construction of the quoted portion of the statute, bqt it seems reasonably clear that “B” securities under the act were intended only to be offered at private sales, as distinguished from public offerings where, as in the case at bar, approximately 15,000 shares were distributed through a broker’s salesman to the general public. Purchasers of stock such as banks, trust companies or insurance companies need no protection, but individual buyers of small amounts of securities who have no means of investigation and rely upon the representations of a licensed broker, should be afforded protection under the act. To hold otherwise would make of the law a shield for the protection of the unscrupulous seller, and the statute was not enacted for that purpose. These conclusions are supported by the language of section 5 which provides that sales may be made by or on behalf of the vendor “who is not an issuer, or underwriter thereof, or a dealer or broker;” for if a vendor may act through a broker in the sale of his stock, it is difficult to understand why the statute should discriminate against a broker in the sale of his own stock. The obvious reason, as pointed out by plaintiff’s counsel, is that a sale by a broker gives assurance to the public, ipso facto, that such securities are properly qualified.

From an examination of the entire context of the statute regulating the sale of securities in this state, we conclude that the public offering of unqualified stock to a large number of persons, any one of whom might become a prospective purchaser, is not such a transaction as to come within the exemptions of section 5. Any other interpretation would, in our opinion, be contrary to the spirit as well as the letter of the act, and would permit and encourage sales through brokers on commission of unqualified securities to gullible and unwary buyers, without affording them any protection whatsoever.

Accordingly, the summary judgment of the circuit court should be affirmed, and it is so ordered.

Judgment affirmed.

Scanlan and Sullivan, JJ., concur.


source: Caselaw Access Project

license: Public Domain

text:
    James W. Beach, Appellee, v. H. Boettcher, Appellant.
    Gen. No. 42,900.

      Opinion filed May 2, 1944.
    Scott, MacLeish & Falk, of Chicago, for appellant; Robert S. Cushman and Joseph A. Dubbs, both of Chicago, of counsel.
    Eugene C. Jachimowski, of Chicago, for appellee; Eugene K. Lutes, of Chicago, of counsel.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

In an action of forcible entry and detainer, tried by the court without a jury, judgment for possession was entered in favor of plaintiff, from which defendant has taken an appeal.

The statement of claim merely alleged that plaintiff was entitled to the possession of the premises known as 3121 West Moffat street, Chicago, and that defendant unlawfully withheld possession thereof from plaintiff. No claim was made for unpaid rent. Defendant’s answer, after denying the allegations in the statement of claim, averred:

“2. On November 15, 1940 defendant entered into a lease of the premises described in the statement of claim with Edith Beach and the plaintiff James W. Beach as lessors for a term of nine months commencing on December 1, 1940 and ending October 1, 1941 at a monthly rental of $27 per month. Upon the expiration of said lease, defendant, by agreement with the plaintiff and Edith Beach, continued to occupy the premises on a month to month basis at the same rental as that provided in the expired agreement, and defendant still occupies said premises on that basis. Neither the lease nor any other agreement required defendant to pay the taxes extended against the real estate in which the demised premises are situated. Neither plaintiff nor any one on his behalf, nor any one on behalf of the owner or owners of said premises, paid the taxes for the year 1939 extended against the real estate in which the demised premises are located and said real estate was sold to Interstate Bond Company, a corporation, on August 13, 1940 and a certificate of purchase duly issued to said corporation therefor. Said Interstate Bond Company likewise paid the balance of the 1932 and 1938 taxes which were delinquent upon said real estate and likewise paid the taxes extended against said real estate for the years 1940 and 1941. Neither plaintiff nor any one on his behalf, nor any one on behalf of the owner or owners of said real estate, redeemed said real estate from said tax sale and upon compliance by the purchaser with all requirements of law relating thereto, on July 14,1943 Michael J. Flynn, County Clerk of Cook County, Illinois duly executed a tax deed conveying title in fee simple to the following described parcel of real estate:
“Lot 26 in Subdivision of Block 4 of Nils F. Olson’s Sub of all that part lying West of Clarkson Avenue of NW-ü, SW-%, Section 36, Town 40 North, Range 13, East of the Third Principal Meridian, situated in the County of Cook and State of Illinois; being the real estate in which the demised premises are located, unto said Interstate Bond Company, which deed was duly recorded with the Recorder of Deeds on July 15, 1943 as Document No. 13107999 in Book No. 38429, page 362 of Records. Plaintiff is advised on July 15, 1943 the said Interstate Bond Company duly conveyed said premises to J. H. Miller of the City of Chicago, County of Cook and State of Illinois, which deed has not yet been recorded with the Recorder of Deeds.
“3. Upon the conveyance of said real estate by Michael J. Flynn, County Clerk of Cook County, to Interstate Bond Company, plaintiff ceased to have any right to possession of the premises described in the statement of claim'. Plaintiff has no right to make a demand for possession of said premises and has no right to maintain this action.
“4. While not legally required to do so, as an evidence of good faith, defendant hereby offers to pay the rent reserved in the lease of the demised premises unto the Clerk of this Court until plaintiff reacquires the outstanding title, or until the Interstate Bond Company or J. H. Miller, its grantee, establishes its or his rights thereto, or until this court shall order the same returned to this defendant.”

When the cause was reached for trial the parties agreed that rent for the month of July 1943 had not been paid and that plaintiff had duly served upon defendant a demand for possession as required by law. The court thereupon stated that the allegations of paragraphs numbered 2, 3 and 4 of defendant’s answer attempted to raise a title question which could not be litigated in an action of forcible entry and detainer, that the facts set forth in the answer did not'constitute a defense to plaintiff’s cause of action, and without any hearing, entered judgment in favor of plaintiff for possession of the premises. Under the procedure followed by the court, the material averments of the answer must be taken as true.

In support of the judgment plaintiff relies principally on the generally accepted rule that a tenant is estopped to deny the title of his landlord, and that forcible entry and detainer being a civil remedy for possession, title to the premises may not be inquired into. The court evidently adopted that theory in deciding the case and failed to take into account decisions in Illinois and elsewhere which hold that the general rule with respect to estoppel by deed, is subject to the exception that a tenant may show the real estate has been conveyed subsequent to the execution of the lease, either voluntarily by the landlord or by operation of law. That exception, referred to by some authorities as “estoppel by lease,” was first enunciated by the Supreme Court in Wells v. Mason, 5 Ill. (4 Scam.) 84 (1842), as follows: “For although a lessee cannot deny his lessor’s title, but is estopped by his deed (2 Ld. Raymond 1550; 5 Eng. Com. Law R. 178), yet he may show that he had but a limited interest which has determined, as was done in Hill v. Saunders [10 Eng. Com. Law R. 402], before cited.” Subsequently in 1851 the Supreme Court in Tilghman & West v. Little, 13 Ill. 239, elaborated on the circumstances under which the exception may be invoked as follows: “But the tenant may show that the title of the landlord has terminated, either by its original limitation, or by a conveyance to himself or a third person, or by the judgment and operation of law. If the landlord transfers the estate, the allegiance of the tenant is due to the grantee. If the estate is vested in a third person by operation of law, the tenant holds the possession subject to the title of such person. The tenant may purchase in the premises under a judgment against the landlord, and set up the title thus acquired in bar of an action brought against him by the landlord. In such cases the relation of landlord and tenant becomes dissolved, and the latter no longer holds the premises under the former. England v. Slade, 4 Durn & East, 682; Jackson v. Davis, 5 Cowen, 123; Jackson v. Rowland, 6 Wend. 666; Gregory’s Heirs v. Crabb’s Heirs, 2 B. Monroe, 234; Nellis v. Lathrop, 22 Wend. 121 [and citing, in a footnote, Wells v. Mason, 4 Scam. R., 90].” Franklin v. Palmer, 50 Ill. 202, decided in 1869, St. John v. Quitzow, 72 Ill. 334 (1874), and Hardin v. Forsythe, 99 Ill. 312 (1880), are to the same effect.

Still later, in Corrigan v. City of Chicago, 144 Ill. 537 (1893), Illinois decisions and English cases upon the subject were again reviewed, and in discussing the law of estoppel by lease and the right of a tenant to show that the landlord’s title had been conveyed or terminated, the court said: “The doctrine is well established, that although the lessee can not show that his lessor had no title to the premises when the tenancy began, he may show that he had a limited estate only, which was determined by its own limitation before the cause of action accrued, as where he held the estate for the life of another, or the like, which expired during the term [citing cases]; or that he had sold and conveyed the land, or has been evicted by title paramount, or that his title has been sold under execution and conveyed. [Citing Franklin v. Palmer, 50 Ill. 202, Tilghman v. Little, 13 Ill. 239, and other authority.] This rule applies whether the action be for the recovery of the premises, or for rent accrued after the extinguishment of the landlord's'title, (Taylor’s Landlord and Tenant, sec. 627-708, and cases cited); and whether the estoppel sought to be set up arises in pais, or by deed. The estoppel in pais arises, if at all, because of the tenant’s having entered under the title at the beginning of the lease. This he admits. But it is not inconsistent therewith to plead and prove that such title has subsequently expired. And so where the estoppel is by deed, ‘the rule is well settled that a tenant is not allowed to dispute his landlord’s title after having accepted possession under him. ... A lessee may, however, plead that, although the lessor had an interest in the premises at the time of making the lease, his interest terminated before the alleged cause of action arose.' [Citing cases.] . . .It would seem, therefore, that where the title of the landlord is extinguished in the whole estate during the term, the liability of the tenant to pay rent also ceases: and that in any action brought by the landlord for the rent accrued after the termination of his estate, the tenant may plead such termination in defense." (Emphasis ours.) Recent decisions have followed the earlier eases. (Spafford v. Hedges, 231 Ill. 140, and Mitzlaff v. Midland Lumber Co., 338 Ill. 575.)

Defendant’s counsel call our attention to -the fact that although no cases have reached the reviewing courts of this state involving an attempt to assert an estoppel by lease where the subsequent conveyance of the landlord’s title was by tax deed, such cases have been- decided by courts of review in other states, and the defendant has been held not estopped by his lease to show the conveyance by tax deed. It was so held in Keys v. Forrest, 90 Md. 132, 45 Atl. 22, where, in disposing of a claim that the tenant was estopped to dispute the landlord’s title which had been sold for nonpayment of taxes, the court said: “In Presstman v. Silljacks, 52 Md. 657, the right of the tenant in such case to dispute the landlord’s title is considered, and the English and American authorities were reviewed, and it was held that the tenant should be ‘ permitted to show that his landlord’s title has expired, or been transferred or defeated.’ As said by Judge Sharswood in Duff v. Wilson, 69 Pa. 316: ‘It is always competent for a tenant to set up that the title of his landlord has come to an end subsequent to the- date of the lease; and that whenever the enjoyment ceases by lawful title, rent, which is the recompense of enjoyment, also ceases.’ When the taxes for 1894 were duly levied, they became liens on this property. ‘The title of the appellant to the reversion was subject to the lien, and when the lien was legally enforced, the title of the appellant ih the reversion, and the title of owner of the term of years were both gone. The legal effect of the tax sale which was reported to, and ratified by the Circuit Court, was to vest, prima facie, the fee-simple title in the purchaser and his grantees.’ Textor v. Shipley, 77 Md. 476. The decree will be affirmed with costs above -and below.” Twardus v. Crewson, 182 Wash. 522, 47 P. (2d) 829, and Teich v. Arms, 5 Cal. App. 475, 90 Pac. 962, also discuss the question with like conclusions.

As an additional ground for reversal, defendant contends that plaintiff had no right to institute an action of forcible detainer after the county clerk had conveyed the demised premises by tax deed to Interstate Bond Company, and cites section 14 of the Landlord and Tenant Act (Ill. Rev. Stat. 1943, ch. 80 [Jones Ill. Stats. Ann. 72.01 et seq.]) as authority for his contention: “The grantees of any demised lands, tenements, rents or other hereditaments, or of the reversion thereof, the assignees of the lessor of any demise, and the heirs and personal representatives of the lessor, grantee or assignee, shall have the same remedies by entry action or otherwise, for the non-performance of any agreement in the lease, or for the recovery of any rent, or for the doing of any waste or other cause of forfeiture, as their grantor or lessor might have had if such reversion had. remained in such lessor or grantor.” The foregoing section is based upon the English Statute of Covenants (32 Henry VIII, ch. 34, sec. 1), which was adopted in Illinois by legislative enactment. Fisher v. Deering, 60 Ill. 114 (1871). The obvious meaning of section 14 is that upon a conveyance of the reversion, the grantee shall succeed to the rights of the lessor under the lease, including the right to institute an action to recover possession of the demised premises, and it would logically follow that after a conveyance of the reversion the lessor no longer has any right to bring such action. Defendant’s counsel say that although no cases have arisen in Illinois applying the foregoing principles to situations where a lessor, after the issuance of a tax, master’s or sheriff’s deed conveying the reversion to a third party, has attempted to recover possession from a tenant in a forcible detainer action or to recover against a tenant for subsequently accruing rent, such cases have arisen in other states, and in substantially every instance where judgment was entered against the tenant, reversal was had in the reviewing court. An examination of the cases cited indicates that such was the fact in Sherman v. Spalding, 126 Mich. 561, 85 N. W. 1129, which is precisely in point, and cites several cases to the same effect, including Keys v. Forrest, 90 Md. 132, 45 Atl. 22. The same principle is applied where the lessor’s title has been sold to a third person at an execution sale and the lessor attempts to recover rent, possession, or both, from the tenant after the sheriff’s deed has been issued to the third party. Smith v. Crosland, 106 Pa. 413; Lancashire v. Mason, 75 N. C. 455.

In reply to these various propositions of law, plaintiff first argues that a mere tax deed, unsupported by other sufficient evidence of its validity, is not proof of title. That contention is untenable under the circumstances presented, because the case was tried upon the pleadings, the court holding as a matter of law that the allegations of paragraphs 2, 3 and 4 of defendant’s answer did not constitute a defense to plaintiff’s cause of action. In effect, the trial court, sua sponte, made and sustained a motion for judgment for the plaintiff on the pleadings, and thereby assumed the averments of the answer as true. Indeed, if they were not, there is absolutely nothing in the record to show that defendant had ever been plaintiff’s tenant or that plaintiff had any rights at all in the premises, because the facts with respect to the existence of a lease, the length of its term, the monthly rent, and all the other undisputed facts, appear only in the averments of defendant’s answer, and plaintiff cannot justifiably treat a portion of the allegations of the answer as true for the purpose of this appeal, and refuse to give the same effect to the remaining averments. The specific contention that the judgment should be affirmed because defendant failed to offer in evidence and to incorporate in the record the original of the tax deed or a certified copy thereof, may be briefly disposed of by stating that he had no opportunity to do so.

It is further urged that there is no proof as to the validity of the tax deed, and plaintiff’s counsel argue that the averment of the issuance of the deed to a third party and its subsequent recordation, does not satisfy the statutory requirement pertaining to notice of the expiration of the period of redemption and the filing of a proper affidavit (Ill. Rev. Stat. 1943, ch. 120, secs. 263 and 265 (pars. 744 and 746) [Jones Ill. Stats. Ann. 119.760, 119.762].) However, the answer alleges that taxes for 1939 were not paid; that the premises were sold and a certificate of purchase issued to the purchaser who paid the balance of the delinquent taxes and likewise paid the subsequent taxes for the year 1940 and 1941; that the premises were not redeemed from the tax sale; and that “upon compliance by the purchaser with all requirements of law relating thereto” (which must be fairly held to include service of notice of the expiration of the period of redemption, and the preparing and filing of a proper affidavit as provided by statute), the county clerk executed a tax deed conveying title in fee simple to the purchaser, which was subsequently recorded. These allegations set forth in sufficient detail every requirement for a valid tax deed.

In the case at bar defendant is not attempting to assert title to a third party for the purpose of avoiding payment of rent, because in paragraph 4 of his answer he offered to pay the rent reserved in the lease, to the clerk of the court until plaintiff reacquires the outstanding title, or until the purchaser or its grantee establishes its or his rights thereto, or until the court should order the same returned to defendant. He is entitled to such protection, for otherwise he might be subjected to double liability.

Since there seems to be no dispute as to the salient facts averred in defendant’s answer, it would serve no useful purpose to remand the cause for further trial upon the merits. The judgment of the municipal court is therefore reversed, and the cause is remanded with directions only that when defendant deposits the accrued rental as the court may direct, judgment be entered in his favor.

Judgment reversed and cause remanded with directions.

Scanlan and Sullivan, JJ., concur.


text:
    Star Transfer Company, Appellant, v. Underwriters at Lloyds of London, Subscribing Policy No. 29,198, Appellees.
    Gen. No. 42,957.

      Opinion filed May 2, 1944.
    David C. Ruttenberg, of Chicago, for appellant; Arthur A. Wolfinsohn and David C. Ruttenberg, both of Chicago, of counsel.
    Ekern, Meyers & Matthias, of Chicago, for appellees ; Donald L. Thompson, William G. Chorn and Arthur F. Gruenwald, all of Chicago, of counsel.
   Mr. Presiding Justice Friend

delivered the opinion of the court.

In a suit brought to recover on a workmen’s compensation indemnifying policy, tried by the court upon stipulated facts, plaintiff suffered an adverse judgment from which it appeals. It appears that in August 1935 Underwriters at Lloyds of London issued a blanket workmen’s compensation policy wherein they agreed to indemnify Star Transfer Company for any sums in excess of $2,000 that it would be compelled to pay to any of plaintiff’s employees claiming compensation for injuries. On June 4, 1936, while in the course of his employment by plaintiff at Grand Rapids, Michigan, one Ivan Wells threw a quarter of beef onto his shoulder, causing his left lower extremity to buckle under him, without being struck by anything or without slipping. X-rays taken at the hospital immediately after the injury disclosed a fracture of the left femur, which had broken off close to the trochanter, or hip socket. G. E. Azzato, an experienced adjuster, was employed' by plaintiff to look after the claim. On July 8,1936, while Wells was still hospitalized, without any notice or attempt to defend on the merits and without the knowledge or consent of the defendants, plaintiff agreed in writing to pay him $16.20 weekly during partial disability, and total disability as the facts and law should later warrant. The agreement was approved on July 27, 1936 hy the Department of Labor and Industry of Michigan, as required by the Michigan Workmen’s Compensation Act. Ndne of the defendants nor their Chicago designated agent received notice of the injury until some 16 months after it occurred, notwithstanding provisions of the policy that “Notice of any accident or disease covered by this Policy shall be given ... as soon as possible after the accident or disease has been brought to the notice of the Employer,” and that “The Employer shall not make any payment, settlement, or admission of liability, in respect of any injury for which the Underwriters shall be liable under this policy, without the consent of the Underwriters.”

Throughout the remainder of 1936 and most of 1937 plaintiff continued to compensate Wells as agreed, until it had paid him $1,134, in addition to $241.90 for his doctors’ bills. Defendants first learned of the injury on October 27, 1937, when the matter was called to their attention by Azzato in a letter to their Chicago agent, wherein they were advised that the injury was of a serious nature, that Wells had been hospitalized for 12 weeks, that the fracture was still ununited and had resulted in a two-inch shortening of the leg, and that $16.20 weekly compensation had' been paid to Wells since the injury, which then aggregated $1,134. The adjuster suggested that since it would be necessary to continue the partial disability compensation for approximately 52 weeks more, a lump settlement with Wells on the basis of the minimum of 500 weeks’ partial compensation, as required by the Workmen’s Compensation Law of Michigan, was to be desired, and concluded by saying that he “thought it advisable to make a report of this occurrence to you at this time, in the event you wish medical examinations or decide to employ Counsel to make such recommendations or assist in any way ... in employing some method of terminating this claim at this time.” After investigation, defendants declined liability, whereupon Azzato negotiated a final settlement with Wells by paying him an aggregate of $5,636.90 for compensation, doctors’ bills and attorneys’ fees. Plaintiff then brought suit to recover $3,636.90, representing the excess above the $2,000 minimum provided for in the policy.

One of the questions presented for determination is whether timely notice of the accident was given in accordance with the provisions of the policy. Plaintiff contends that it was not required to serve notice of the accident unless and until there was reason to believe that it would cause a loss in excess of $2,000, and that the extent of the injury could not be ascertained earlier than October 1937. • Numerous cases are cited touching upon the question of notice.- The applicable rule to be deduced from the authorities is that notice is not required until such facts have developed as would suggest to a person of ordinary and reasonable prudence that liability might arise; and the requirement is met by giving notice within a reasonable time after the injury presents aspects of a possible claim for damages. Updike Inv. Co. v. Employers Liability Assur. Corp., 131 Neb. 745, 270 N. W. 107; National Paper Box Co. v. Aetna Life Ins. Co., 170 Mo. App. 361, 156 S. W. 740; Melcher v. Ocean Accident & Guarantee Corp., 226 N. Y. 51, 123 N. E. 81; Nye v. Louis Ostrov Shoe Co. (Ohio), 43 N. E. (2d) 103. In the case at bar plaintiff knew the injury was extremely serious because the X-rays immediately disclosed that the ball and socket were disconnected from the femur, and it is admitted that “the bone fragments of the fracture did not normally unite at any time thereafter,” and left a permanent shortening of the leg. 'Plaintiff cites a statement in R. N. Gray’s Attorneys’ Textbook of Medicine, 2d ed., p. 1232, predicated on tables compiled by insurance companies, that the temporary disability caused by fractured femurs, continues for an average of 249 days. But plaintiff waited approximately eight months beyond that period before giving notice. This unreasonable delay, after any person of ordinary and reasonable prudence could have ascertained that liability might arise, and after the injury presented aspects of a probable claim for damages, was not in any sense a compliance with the rule invoked, nor with the provisions of the policy.

The other question presented is whether plaintiff’s consummation of an agreement with Wells for partial disability and the approval thereof by the Michigan Department of Labor and Industry, without the knowledge or consent of defendants, so prejudiced the latter’s rights as to relieve them from liability. It is conceivable, of course, that in view of the peculiar nature of the accident, defendants might have interposed the defense that the injury was due to an inherently defective bone structure, and the deprivation of such right, without the necessity of proving that the results of the litigation would have been different, constituted prejudice. The stipulated facts disclose that within 34 days after the injury plaintiff procured an award foreclosing defendants’ right to interpose a defense, because under the law of Michigan where the accident occurred, “Approval, of an agreement for compensation and the award thereon is ordinarily conclusive of the employee’s right to compensation.” Hughson v. City of Kalamazoo, 271 Mich. 36, 260 N. W. 111; Lumbermen’s Mut. Casualty Co. v. Bissell, 220 Mich. 352, 190 N. W. 283. A similar situation arose in Keehn v. Excess Ins. Co. of America, 129 F.(2d) 503, which involved excess reinsurance under a policy providing that “The Company shall notify the Reinsurer immediately after it has had notice of any accident in which this reinsurance is or may probably be involved, ” and that “The Reinsurer shall have the right and opportunity to associate with the Company in the defense and control of any claim or suit or proceeding relative to an accident where the claim or suit involves this reinsurance.” The excess reinsurer received no notice until almost two years after the injury and after its rights had been prejudiced by court proceedings of which it had not been informed. In the Keehn case, the last and only one of three related proceedings in which the excess reinsurer was a party, it defended itself on the ground that it had not been given notice of the accident in compliance with the provisions of the policy hereinbefore quoted. The circuit court of appeals observed that “it would be wasted energy” to consider the authorities from other jurisdictions since the Supreme Court of Illinois had settled the law in two early cases (Niagara Fire Ins. Co. v. Scammon, 100 Ill. 644, and Scammon v. Germania Ins. Co., 101 Ill. 621) which had not been subsequently overruled, and held that ‘ The right [to be given notice of the accident and of the original proceedings, if it was likely to involve reinsurer] was provided by the terms of the contract and we are of the view that the deprivation of such right would constitute prejudice without any actual proof that the results of the litigation would have been different. ’ ’ The provisions of the policy in suit are similar to those in the Keehn case, and the reasoning employed by the circuit court of appeals in that proceeding is applicable to this suit. With knowledge of the facts, failure to give defendants notice within a reasonable time after the occurrence of the accident was a breach of one of the prime conditions of the contract, the performance of which was assumed by plaintiff.

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

Judgment affirmed.

Scaulax and Sullivan, JJ., concur.


author: Mr. Justice Scanlan

text:
    Ruth Bender and Robert Bender, Appellants, v. William Cooper and Nephews, Inc., Appellee.
    Gen. No. 42,310.

      Opinion filed May 2, 1944.
    I. B. Lipson and A. C. Lewis, both of Chicago, for appellants.
    Hay, Morton & Freytag and Gardner, Carton & Douglas, all of Chicago, for appellee; Erwin W. Roemer, Herman T. Van Mell and William L. Fay, all of Chicago, of counsel.
   Mr. Justice Scanlan

delivered the opinion of the court.

A suit for damages by Ruth Bender and Robert Bender, her husband, against defendant. Ruth Bender sued for personal injuries received by her, and Robert Bender sued for divers sums of money expended by him or for which he became liable by reason of the injuries sustained by his wife. At the close of plaintiffs’ case the trial court, on motion of defendant, instructed the jury to find defendant not guilty. Plaintiffs appeal from a judgment entered on the verdict.

No point is raised on the pleadings. Defendant is a manufacturer of disinfectants and one of its products is called ‘ Cooper’s Pine Oil Disinfectant, ’ ’ which is sold in original sealed cans. While plaintiff Ruth Bender was pouring the liquid contained in a can of the disinfectant into a coffee can, some of the disinfectant splashed in her eye and she sustained the injuries for which she sues. Both parties, in their briefs, treat Ruth Bender as the plaintiff in the cause and we will do likewise.

Mrs. Bender is a well educated woman. Her father, a doctor, was associated in business with his brother, also a doctor. She testified that she was raised in a medical atmosphere. She and her husband lived on a farm in Warrenville, Illinois. She had thereon a dog kennel, and a veterinary recommended defendant’s disinfectant as a good disinfectant to use around kennels. She then commenced using Cooper’s Pine Oil Disinfectant and, prior to the accident, she had been using it for about four years. During that period she had purchased a dozen or more gallon cans of the disinfectant. She bought it to use around the kennels. She testified that she did not use the Pine Oil in connection with her body; that she did not use it on the bodies of the dogs; that she used it to spread on the floors of the kennels and on the walls and beds of the' kennels for the purpose of disinfecting and leaving a pleasant odor; that during the years that she had used the disinfectant she. occasionally got some on her hands and that when this occurred she washed'it off with water and that she had had no trouble with the disinfectant before the túne in question. The material parts of the label upon the can read as follows:

“Cooper’s Pine Oil Disinfectant
“This is made according to the formula of the IT. S. Government Hygienic Laboratory, and has a coefficiency of 3 when tested by the U. S. Department of Agriculture method. This means tha/t Cooper’s Pine Oil Disinfectant is guaranteed to be 3 times stronger baetericidally than pure carbolic acid crystals when tested against a vigorous culture of Typhoid germs (Bacillus Typhosus) under conditions prescribed for this test.
“For general use Cooper’s Pine Oil Disinfectant is very desirable — it is safe, non-irritating and of pleasing odor, whilst definitely recommended for use against Typhoid Fever germs (B. Typhosus). It is also effective against many other germs including Pneumococcus, Bac. Diphtheriae, Bac. Enterititis, Bac. Dysenteriae and Bac. Coli.
“For General Disinfecting and Cleaning
“As a deodorant nse 2 ounces (% cupful) in 3 gallons of water. If stronger odor is desired use more to suit conditions. For disinfecting use 6% ounces in 3 gallons of water. Add the water to the disinfectant at rate of one gallon of Pine Oil Disinfectant to 60 gallons of water — put it in pail and stir well after adding water. This solution acts as a disinfectant against Bac. Typhosus.
“For Use in Kennels
“Scrub or clean and spray regularly at strength of 6% ounces to 3 gallons of water or at the rate of one gallon of Pine Oil to 60 gallons of water — this makes an effective disinfectant and deodorant. If premises simply require sweetening then 2 ounces to 3 gallons is sufficient.

Mrs. Bender further testified that when she first used the Pine Oil she read all of the printed matter on the label, but thereafter she read only that part of the label in which she was interested, “that related to the dog kennels;” that she “never measured it [the oil] accurately;” that on July 13, 1939, the day she was injured, she was pouring the concentrated Pine Oil into a one-pound coffee can for the purpose of mixing it with water; that the disinfectant poured like a very thick liquid, “like molasses;” that the coffee can was on the floor and as the can containing the disinfectant was heavy she held it with two hands, and that she “was probably squatting down more or less and taking the weight of the big can in two hands in order to pour it into the small one, and watching what I was doing. . . . Some of it splashed into my eye . . . my right eye;” that the immediate sensation was “pain, smart, stings,” and she then reached for the garden hose, which was running, and turned it on her face and eye and tried to wash out what was hurting, with very little result; that she intended to pour about one-half. inch of the Pine Oil into the coffee can and then fill that can with water; that the coffee can was about five inches high and possibly seven inches in diameter; that the can of disinfectant was one-third or one-half full at the time; that she read the mixing directions practically every time she used the oil; that she had poured possibly a quarter of an inch into the coffee can at the time she was injured; that she intended to use the disinfectant on the floor of the kennel, which had a wooden floor and wooden walls; that she intended to put a lot of the oil mixture on the wall — it was a very warm day — and let it soak into the boards of the floor and walls and act as something of a preservative for the wood; that she intended to take a paint brush and lay the pine oil solution on thick; that after she bought the first can of the disinfectant she read the label on the can. “ Q. Do you see any particular portion of that, that you remember as to its use? A. Well, I know that I read the whole label at one time and then I went back and read the general directions of the kennels, because that was what I was most interested in. Q. And did you rely upon what you read' in the label? A. I almost always do. Q. Well, did you? A. I certainly did. Q. Did you read that portion of it which says it is safe and non-irritating? A. I did. Q. Did you rely upon that? A. Implicitly. ’ ’

Plaintiff contends that the trial court erred in directing a verdict for defendant at the close of plaintiff’s case. She states: “The plaintiff’s theory is that the manufacturer is liable — both on the theory of negligence and breach of warranty. There was privity between the manufacturer and the purchaser, Ruth Bender. She had a right to rely on the representation on the label that the oil in the can was ‘ safe and nonirritating,’ and the evidence shows that she did rely upon it. Plaintiff was not required to construe the warranty to mean: After you get this liquid diluted, it will be safe and non-irritating, but until then, beware;” that plaintiff was “justified in relying upon the statements in the label. A manufacturer who falsely labels a product as safe when it is in fact dangerous is liable to the person injured.” Plaintiff concedes, as she must, that the disinfectant was not intended for use on any part of the human body, and she further concedes that she did not intend to use.it in her eyes nor on her body; but she argues that a purchaser of an article like the instant disinfectant has in mind that accidents happen, and that she had the assurance from the label that the undiluted disinfectant was safe and non-irritating and that if any of it should accidentally splash upon any part of her body, including her eye, no ill effects would follow.

Defendant contends: “ (1) There was no proof that the defendant falsely labeled its product; (2) No reasonable person could have construed the label on the defendant’s product to mean that it was safe to put into the eye, and no warranty or representation was made by the defendant to that effect; (3) The plaintiff Buth Bender, an intelligent woman, cannot be heard to say that she believed there was no necessity of keeping the defendant’s disinfectant out of her eye; (4) Pine Oil Disinfectant is not an imminently dangerous article. It was not negligently manufactured, nor was it fraudulently or deceitfully represented. The general rule that a manufacturer is not liable to third persons not in privity with him is therefore applicable to this case; (5) No negligence of defendant proximately caused the injury; (6) Plaintiff Buth Bender’s own carelessness caused her injury; (7) No privity existed between plaintiffs and defendant, and neither the complaint nor the evidence supports a recovery upon a theory of warranty or upon any other theory. ’ ’

The weakness of plaintiff’s case is that she takes from the label a few words and bases her claim upon these words, ignoring all other statements on the label. She claims that she had a right under the law to rely upon these words and had a right to assume that the words applied to the liquid undiluted. It will be noted that the words upon which plaintiff relies are not set out in large or bold-faced type nor in a manner that would call special attention to -them. What defendant represented as to the undiluted disinfectant must be gathered from an examination of the entire label. See Carmen v. Eli Lilly & Co., 109 Ind. App. 76, 32 N. E. (2d) 729, 732, where it was held that the decedent was bound to consider the pamphlet accompanying the package of vaccine as a whole, and not single out and rely upon a single word or line or paragraph to the exclusion of the rest. In the instant case, plaintiff, a well educated woman, brought up in a medical atmosphere, states that just before she commenced using the disinfectant she asked her veterinary “for a disinfectant that I could use around the kennel that would smell good and would be a good strong disinfectant,” and that he recommended Pine Oil Disinfectant. She read the entire label when she purchased the first can and she read the mixing directions practically every time she used the oil. The label,- after stating that the disinfectant is made according to the formula of the U. S. Government Hygienic Laboratory, and has a coefficiency of 3 when tested by the U. S. Department of Agriculture method, further states: “This means that Cooper’s Pine Oil Disinfectant is guaranteed to be 3 times stronger bactericidally than pure carbolic acid crystals when tested against a vigorous culture of Typhoid germs (Bacillus Typhosus) under conditions prescribed for this test.” Under the heading, “For Use in Kennels,” are the directions: “Scrub or clean and spray regularly at strength of 6% ounces to 3 gallons of water or at the rate of one gallon of Pine Oil to 60 gallons of water . . . .” This direction gave notice to plaintiff that in order to make the disinfectant safe, even for dogs, it was necessary to add 60 gallons of water to one gallon of Pine Oil. When this direction is considered in connection with the statement that the disinfectant is 3 times stronger bactericidally than pure carbolic acid crystals, the argument that plaintiff had a right to assume from the words," “safe, non-irritating,” on the label that if the undiluted disinfectant accidentally splashed into her eye- — the most delicate of all of the parts of the human body — it would cause no irritation nor harm to the eye, is weak indeed. A user of the disinfectant who reads the language of the entire label is clearly apprised that the disinfectant must be diluted with water before it can be used for any of the purposes stated on the label, and the words upon which plaintiff bases her right to recover refer to” the disinfectant after the addition of water in accordance with the directions given. Plaintiff knew, far better than the average individual, the effect that this very strong disinfectant, undiluted, would have upon the eyes, and, as we have heretofore stated, she concedes, as she must, that the disinfectant was not intended to be used upon any part of the human body.

The cases cited by plaintiff in support of her claim are readily distinguishable from the instant case upon the facts. To briefly refer to the cases cited: •

In Hruska v. Parke, Davis & Co., 6 F. (2d) 536, the plaintiff’s petition alleged that the defendant was a manufacturer of chemicals and sold to druggists generally a preparation called “Camphor Solution Neutral,” which it advertised and recommended for use by hypodermic injection; that the preparation, when properly made as a solution of camphor in a vegetable or animal oil, was a harmless and beneficial remedy, well known to and used by physicians and hospitals, but that defendant’s preparation was made with mineral oil, which rendered it injurious to health, as defendant well knew; that the plaintiff was treated with such preparation by a physician, who had no knowledge that it contained mineral oil and who injected large quantities of the preparation into the body of the plaintiff, and as a result the plaintiff sustained permanent injury. It was held that the petition stated a cause of action against the defendant and that the trial court erred in sustaining a demurrer to it.

In Blood Balm Co. v. Cooper, 83 Ga. 457, the defendant prepared and marketed a patent medicine and recommended it to the world as useful for the cure of certain diseases. The bottle containing the medicine had therewith a prescription, made by the proprietor of the medicine, which states that it is to be taken in certain quantities. The medicine with the prescription was sold by the defendant to a druggist for the purpose of being resold to persons who might wish to use it, and the druggist sold the medicine to the plaintiff, who used it in the quantity prescribed. The medicine contained an ingredient, iodide of potash, in such quantity as would prove harmful to the person using it. The Georgia court held that the defendant company was liable to the plaintiff.

In Cahill v. Inecto, Inc., 208 App. Div. 191, 203 N. Y. S. 1, the defendant manufactured a hair dye, known as “Inecto Rapid,” advertised it and represented to the general public that it was suitable for use as a hair dye and for application to the head as such. The plaintiff used the hair dye as directed and a few hours after applying it serious consequences followed. Her physician testified that her ailments were the result of the application of the dye. It was held that in this state of the evidence, the proof of the character of the ingredients used in the dye being solely within the defendant’s control, it was required to show, in order to meet the plaintiff’s case, that the composition was harmless, and that as it made no attempt to do so the judgment was affirmed.

In Bundy v. Ey-Teb, Inc., 289 N. Y. S. 905, a nisi prius case, the defendant, a manufacturer of eyebrow and eyelash dye containing ingredients in quantity poisonous, harmful and dangerous for use in or about the eyes, was held liable to a patron of a beauty shop whose eyes were injured by the application of the dye. In that case the label attached to the container read: “Non-Toxic Safe Lasting Ey-Tee contains no paraphenylenediamine, no aniline derivatives, no poisonous metals. It complies with all pure food' and drug regulations. It requires no predisposition test. Eytec may even be dropped into the eyes without harm, and may be used with absolute safety. Ey-tee a product of Ey-Teb Co. — 425 Fifth Ave.” The plaintiff had read the label and had relied upon the statements made therein. Judgment was entered for the plaintiff.

In Reiss v. Kirkman & Son, 242 App. Div. 77, 273 N. Y. S. 7, the defendant was sued for damages for personal injuries alleged to have been suffered by the plaintiff through the use of a certain product manufactured by the defendant. The defendant filed a motion in the trial court, under the Civil Practice Act, for the discovery of a portion of the article constituting the basis of the action, for the purpose of analysis. The trial court granted the motion. Upon appeal by the plaintiff to the Supreme Court, Appellate Division, the action of the trial court was affirmed. The court, in its opinion, stated that the manufacturer would be liable if he represented it was harmless when in fact it was poisonous and harmful to one who purchased a package thereof from a drugstore and was injured in using it, but that if some harmful substance had been introduced into the package after it left the control of the defendant and without its fault, the rule would be otherwise.

In Kolberg v. Sherwin-Williams Co., 93 Cal. App. 609, 269 Pac. 975, it was held that the manufacturer of a compound inherently dangerous to orange trees was liable to plaintiff for injuries to his orchard from the use of such compound purchased through a middleman, the manufacturer’s agent having stated to plaintiff that the compound would destroy pests without injury to the trees, leaves, or fruit.

Henry v. Crook, 202 App. Div. 19, 195 N. Y. S. 642, and Hertzler v. Manshum, 228 Mich. 416, 200 N. W. 155, have no application to the instant case upon the facts.

Plaintiff cites Greenwood v. John R. Thompson Co., 213 Ill. App. 371, wherein it was held that the. law imposes upon a restaurant keeper an implied warranty that the food he serves and sells to his patrons is wholesome and fit to be eaten, and he will be liable if it proves otherwise, whether he was negligent or not.

Dewar v. Loy, 248 Ill. App. 396, cited by plaintiff, has no possible application to the instant case.

While plaintiff introduced evidence that this disinfectant undiluted caused injury to the eyes of rabbits and dogs, it is somewhat significant that .she introduced no evidence that would tend to prove that the disinfectant, diluted in accordance with the directions on the label, if it splashed into the eye, would irritate or injure the eye.

After a careful consideration of this appeal, we have reached the conclusion that the trial court was justified, at the close of plaintiff’s case, in instructing the jury to find a verdict for defendant. The judgment of the superior court of Cook county is, therefore, affirmed.

Judgment affirmed.

Friend, P. J., and Sullivan, J., concur.


author: Mr. Justice Sullivan

text:
    Lincoln Park Traps, Appellee, v. Chicago Park District et al., Appellants.
    Gen. No. 41,519.

      Opinion filed May 2, 1944.
    John O. Rees and Kirkland, Fleming, Green, Martin & Ellis, all of Chicago, for appellants; Joseph B. Fleming, Philip A. Lozowick, Joseph H. Pleck and John M. O’Connor, Jr., all of Chicago, of counsel.
    Zimmerman & Norman, of Chicago, for appellee; Edward A. Zimmerman and Donald R. Kerr, both of Chicago, of counsel.
   Mr. Justice Sullivan

delivered the opinion of the court.

This proceeding was instituted by plaintiff, Lincoln Park Traps, to restrain defendants Chicago Park District and the commissioners thereof (sometimes hereinafter for convenience referred to collectively as the Chicago Park District), from “molesting or in any way interfering with the rights and privileges acquired by Lincoln Park Traps” under a written lease entered into between said plaintiff and the Commissioners of Lincoln Park on November 26, 1920. Defendants’ motion to strike and dismiss plaintiff’s amended complaint was denied and a temporary injunction issued. Defendants thereupon filed an answer, to which plaintiff filed a reply. This answer was later withdrawn by leave of court and defendants stood upon their motion to strike and dismiss. A decree was then entered which found in part that “the agreement between the plaintiff, Lincoln Park Traps and the Commissioners of Lincoln Park as set out in the said Amended Bill of Complaint, under and by virtue of which the said plaintiff became possessed of and is now in possession of the premises described in the said complaint, is in full force and effect and is binding upon the defendants as successors to the Commissioners of Lincoln Park, and that subject to the provisions of the said agreement it shall so remain until terminated in accordance with the said provisions;” and ordered that a permanent writ of injunction issue restraining the Chicago Park District and the commissioners thereof from “molesting or in any way interfering with the rights and privileges acquired” by plaintiff under the aforesaid agreement. . Defendants appeal from the foregoing portions of the decree.

The amended complaint, which is rather voluminous, alleged substantially that the Commissioners of Lincoln Park, pursuant to an act of the legislature of 1895, had reclaimed certain land from the bed of Lake Michigan and devoted a portion thereof to trapshooting; that plaintiff, Lincoln Park Traps (a corporation not for profit), was organized to promote the sport of shooting and to conduct and maintain a shooting club; that on November 26, 1920 plaintiff entered into an agreement with the Commissioners of Lincoln Park whereby the latter leased to it a portion of the aforesaid reclaimed land, which was a part of Lincoln Park, for a period of 26 years at an annual rental of $50.

The complaint further alleged that pursuant to and in accordance with the terms of the lease and according to plans and specifications approved by the Commissioners of Lincoln Park plaintiff erected on the leased premises a clubhouse at a cost of over $40,000 and constructed on said premises various skeet houses, traps, pits, barricades, fences and sidewalks at a cost of approximately $10,000; that ever since plaintiff took possession of the leased premises and constructed said clubhouse and trapshooting facilities, “members of the general public” have not only been permitted but they have been invited to use same on a “basis of full equality with the members of the plaintiff club;” that adequate supplies of ammunition and targets have been maintained and furnished to “members of the general public” who desired to make use of the trapshooting facilities, “at a price not sufficient to cover the cost of shells and targets plus the addition of a reasonable charge for overhead expenses;” and that “many thousand members of the public” have taken advantage of the facilities so provided.

It was then alleged that on September 27, 1938 an order was entered at a meeting of the Commissioners of the Chicago Park District, successors of the Commissioners of Lincoln Park, which declared plaintiff’s lease forfeited because of its failure to pay the rental stipulated in said lease for the years 1935, 1936, 1937 and 1938 and which directed Lincoln Park Traps to surrender possession of the demised premises to the Chicago Park District and to remove its effects therefrom within 30 days; that on the day of its entry notice of this order was served on plaintiff; that plaintiff immediately tendered payment of the rent then in arrears, which tender was refused; that the Chicago Park District refused to reinstate plaintiff’s lease and to waive the forfeiture and continues to demand possession; that plaintiff is informed and believes that the Chicago Park District through its police officers will “close the property” and prevent plaintiff’s employees and members from using same; and that plaintiff will thereby suffer irreparable damage.

The complaint concluded with the prayer that a temporary injunction be issued restraining defendants from interfering with the rights and privileges acquired by plaintiff under its lease and that upon final disposition of the cause a permanent writ of injunction issue to like effect or that as alternative relief defendants be required to account and pay to plaintiff all moneys expended by it for making the improvements and installing the facilities on the demised premises.

Defendants’ motion to strike and dismiss challenged the validity of the lease, asserting that it was illegal and void because it was beyond the power and authority of the Commissioners of Lincoln Park and its officers to execute the same, that the lease was against public policy and that therefore plaintiff was not entitled to the relief sought.

The decree appealed from refers to the lease as an “agreement.” Plaintiff seems to prefer to designate it as an “agreement” and asserts that in any event “it was not a lease in the ordinary sense but more in the nature of a concession.” There can be no.question but that the instrument involved herein was intended to be a lease when it was executed by the parties thereto. However, we fail to perceive any difference in its legal effect whether it is designated as a lease, a contract, an agreement or a concession.

The land demised to plaintiff was within the confines of Lincoln Park and the only purpose for which the legislature authorized it to be used was as a public park. Park districts are created for the purpose of establishing, maintaining and governing public parks for the recreation, health and benefit of the general public. The law is well settled that a park board cannot lease a portion of its lands to a private individual, .club or corporation, when by the terms of such lease the demised land and the facilities located thereon are not available equally to all the people of the State of Illinois. In Quinn v. Irving Park District, 207 Ill. App. 449, where the commissioners of the Irving Park District sought to restrict the use of the swimming pool and gymnasium in one of its parks to the residents of such park district, it was held that the park and the swimming pool and gymnasium located therein “are held for the use of the citizens of the State generally.” In LePitre v. Chicago Park District, 374 Ill. 184, in discussing the purpose of the creation of the South Park Commissioners, also now superseded by the Chicago Park District, the court said at p. 188:

“The language used' in the act of 1869 directing that the lands when acquired should be held, managed and controlled by the public park for the recreation, health and benefit of the public free to all persons forever, leaves no doubt as to the legislative intent to create a corporation for the primary purpose of rendering a governmental service to the general public. The promotion of health, comfort and recreation for the general public is, as was said in Gebhardt v. Village of LaGrange Park, 354 Ill. 234, among the aims of government. ... To attain such an object is one of the primary purposes of government. ’ The powers given the commissioners to construct and maintain drives and to have general control and management of the parks were granted in the interests of establishing and maintaining a park for public use and not in the promotion of a purely corporate purpose. The direction in the statute that the park shall be used by the public, generally, forever, definitely fixes the ones in whose interest the park was created.” (Italics ours.)

In McPike v. Illinois Terminal R. Co., 305 Ill. 298, the owner of a parcel of land in the City of Alton dedicated it as “park grounds of the city never to be owned as individual or private property” and subsequently the City of Alton leased a portion of the dedicated land to a private individual. There, in holding that the lease was void, the court said at pp. 300 and 301:

1 ‘ The first question arising in this case is whether or not plaintiff in error, under the averments of his bill, is entitled to the injunction prayed. It has long been the settled law in this State that where lands are dedicated to the public for particular purposes they can be used for such purposes only. For those purposes the city may improve, fence, beautify and control them and adopt all necessary rules and regulations concerning their management. Acting in this capacity, the city occupies the relation of trustee of said premises, holding them in' trust for the benefit of the public. The right to the use of such property is not limited to the citizens of the city in which such lands are dedicated, but the citizens of the State generally have an equal right in them and a proper enjoyment of them. . . . It is equally well settled in this State that the city, as trustee of its streets, public squares and parks, has no rightful authority to grant them for any purpose inconsistent with the public use. (Kreigh v. City of Chicago, 86 Ill. 407; City of Quincy v. Jones, 76 id. 231.) It can not be qtiestioned that a lease of public premises to private individuals for private purposes is the exercise of a control over such premises by the city inconsistent with their use as public property. The very nature of a lease precludes the use of the premises by the public and gives to one individual the exclusive right to possess and control the same. It follows that the lease entered into between plaintiff in error and the city council of the city of Alton in 1902 is not a valid lease and therefore affords no basis for the issuance of .an injunction in this case.” (Italics ours.)

It is clear from the foregoing authorities that all lands, the title to which is in commissioners of park districts, are held in trust for the equal benefit of all of the people of the State, that the facilities of park districts are for the equal benefit of all the people of the State and that park districts cannot operate their facilities or permit them to be operated in such a manner that a preferential use thereof is granted to any one person or to any group of persons.

Defendants contend that the lease granted to plaintiff was “ultra vires the powers of the Commissioners of Lincoln Park, was against public policy, and therefore illegal and void. ’ ’ The lease granted plaintiff gun club and its members the unrestricted use of the demised premises and the club building and facilities erected and installed thereon. It was provided in the first paragraph of the lease that the demised premises were “to be used by the Lessee for the sole purpose of Trap Shooting,” in the fourth paragraph thereof that Lincoln Park Traps “agrees to construct, at its own expense” a “building and all necessary appliances, devices and accessories, and particularly including four traps properly installed, for its use and convenience in Trap, Rifle and Revolver Shooting on said premises herein leased,” and in the tenth paragraph thereof that it “agrees that it will not sell meals or refreshments of any kind upon said premises, except to club members, employees and guests.” (Italics ours.) The only use of plaintiff’s facilities which the lease even pretended to reserve for the public generally is that found in paragraphs 8 and 12 thereof.

Paragraph 8 provides in part as follows:

‘1 The Lessee will make ample provision for, and install lockers or storage space in said building for the use not only of its own members but for a reasonable number of non-members as well who shoot at the traps with sufficient frequency to justify the maintenance of lockers dr storage space for them. . . . ”

Paragraph 12 provides as follows:

“The Lessee will make all necessary arrangements so as to permit non-members who shoot at the traps with sufficient regularity to justify the maintenance of a locker for them, to rent available locker or storage space at the Club House, and to purchase targets and shells from the Club at a rate not exceeding twenty per cent (20%) above that paid by members, and will permit all such non-members to shoot at the traps who conform to the rules and regulations of the club.”

Even a cursory examination of the provisions of the foregoing paragraphs demonstrates that plaintiff gun club was authorized under the lease to permit nonmembers thereof (the public) only a limited and restricted use of its trapshooting facilities, while, as already shown, the members of said club had the unrestricted use of such facilities.

-Just what use of its facilities was plaintiff required to afford the public under paragraphs 8 and 12 of the lease? It will be noted that under paragraph 8 it was contemplated that in constructing its clubhouse plaintiff would make ample provision for the installation of lockers for its own members and that they would be entitled to a locker regardless of how seldom or how often they might care to “shoot at the traps” or even if they never did any shooting. Lockers were to be installed for “a reasonable number of non-members” but the only non-members who would be permitted to use them were those “who shoot at the traps with sufficient frequency to justify the maintenance of lockers ’ ’ for them. It will also be noted that under paragraph 12 non-members of plaintiff gun club could not “shoot at the traps” at all unless they were first able to rent lockers, that they could not rent lockers unless they shot at the traps “with sufficient regularity to justify the maintenance of a locker for them” and that a nonmember who was fortunate enough to qualify for the use of a locker was then permitted “to purchase targets and shells from the club at a rate not exceeding . . . 20% above that paid by members.”

As already stated, paragraphs 8 and 12 contained the only provisions of the lease that even pretended to afford the public the use of plaintiff’s facilities and it is obvious that any use permitted the general public of the trap shooting facilities on the demised premises under said paragraphs was seeming rather than real. Under the lease the authority to determine whether non-members (the public) met the test of “sufficient frequency” or “sufficient regularity”, was vested solely in plaintiff. The lease provided no standard by which plaintiff’s facilities were to be made available to the public on any basis of equality with its own members. The reasonableness of the number of nonmembers who were to be permitted to use plaintiff’s facilities and the frequency and regularity of their shooting were left entirely to the fancy, whim or caprice of plaintiff gun club. Thus there was no. restraint on plaintiff’s authority under the lease to discriminate against the use by the general public of the demised park land and the facilities constructed and installed' thereon. There was no provision in the lease for the use of plaintiff’s clubhouse by the public and plaintiff was prohibited thereunder from selling “meals or refreshments of any kind upon said premises, except to club members, employees and guests.” Plaintiff club had 250 members when the complaint herein was filed and membership therein was limited. The by-laws of Lincoln Park Traps restricted its membership by providing that life memberships therein were limited to 100, that the adverse vote of only one director was sufficient to deny a life membership and that resident memberships were limited in number within the discretion of its board of directors.

The lease granted to plaintiff what was tantamount to an exclusive use of a portion of a public park, since it could under the terms thereof effectually bar the general public from the use of its clubhouse and its shooting facilities. It follows that such lease entered into between plaintiff and the Commissioners of Lincoln Park was not a valid lease and therefore it affords no basis for the issuance of an injunction in this case.

The only answer made by plaintiff in its brief to defendants’ contention that the lease was and is illegal and void is that ‘ ‘ since the Commissioners of the Park had the right to make and maintain the improvements and to install the equipment necessary to the sport of trap shooting in its various forms, they had the right to contract with the plaintiff to do these things.” Whether or not a park district may under proper circumstances and in a proper manner contract with others to operate certain facilities on a portion of its land is entirely beside the question as to whether the lease involved herein is illegal and void. Plaintiff cites Bailey v. City of Topeka, 97 Kan. 327, 154 Pac. 1014; City of Port Arthur v. Young (Tex. Civ. App.), 37 S. W. (2d) 385; El Paso Union Passenger Depot Co. v. Look (Tex. Civ. App.), 201 S. W. 714; Vale v. City of San Bernardino, 109 Cal. App. 102, 292 Pac. 689 and Hagerman v. South Park Com’rs, 278 Ill. App. 33, as authorities which sustained the validity of leases of public lands made by park districts or other municipalities. It would serve no useful purpose to discuss the foregoing cases, since the facts-therein are not comparable to the facts here and since in not one of them was there a lease involved which granted special privileges to the members of a private club.

Plaintiff’s amended complaint alleged in effect that, notwithstanding the fact that it was authorized under the lease to give its members preferential use of its clubhouse and facilities and to discriminate against the public in the use thereof, it not only permitted but invited “members of the general public” to use its facilities on “a basis of full equality with the members of the plaintiff club;” and that it furnished adequate supplies of ammunition and targets to “members of the general public” who desired to make use of its trap shooting facilities “at a price not sufficient to cover the cost of shells and targets plus the addition of a reasonable charge for overhead expenses.” While the well-pleaded allegations of fact in plaintiff’s complaint were admitted by defendants’ motion to strike, its alleged practice in the operation of its facilities has no bearing on the validity of its lease. It predicated its right to injunctive relief on the lease and whether it is entitled to such relief depends entirely on the lease itself. Since, as already shown, the Commissioners of Lincoln Park had' no rightful authority to grant the demised premises.for any purpose inconsistent with the public use thereof, the lease was void ab initio.

Plaintiff contends that defendants are estopped from asserting the illegality of the lease. The subject matter of the lease pertained to the exercise of a governmental function. In Benton v. Kaneville Community High School Dist. No. 147, 250 Ill. App. 6, it was said at p. 9: “The doctrine of estoppel does not apply to the exercise of governmental functions. (Otis El. Co. v. City of Chicago, 263 Ill. 419; People v. Brown, 67 Ill. 435; Washingtonian Home of Chicago v. City of Chicago, 157 Ill. 414.) Estoppel does not apply to a matter in the nature of a public right. (People ex rel. Slusser v. Gary, 196 Ill. 310.) ”

In the amended complaint plaintiff asks as alternative relief that defendants be required to account to it for the moneys expended in the erection of its clubhouse and in the construction and installation of the trapshooting facilities on the demised premises, in the event it is held that it is not entitled to injunctive relief. Plaintiff having sustained no damages when its complaint was filed herein, it had no accrued right to an accounting against defendants and therefore its claimed right to require defendants to account for damages it might sustain in the future is prematurely asserted. “Under no circumstances will a judgment or decree take effect upon rights not then existing.” Deke v. Huenkemeier, 289 Ill. 148, 154.

Other points have been urged and considered but in the view we take of this case we deem further discussion unnecessary.

For the reasons stated herein that portion of the decree appealed from is reversed and the cause is remanded with directions to allow defendants’ motion to strike and dismiss plaintiff’s amended complaint for want of equity.

Reversed and cause remanded with directions.

Friend, P. J., and Scanlan, J., concur.


text:
    David W. Raymond, Appellee, v. Albert J. Horan et al. Appeal of Continental Distributing Company, Appellant.
    Gen. No. 42,797.
    Opinion filed May 2, 1944.
    Rudnick & Wolfe, of Chicago, for appellant.
    No appearance for appellee.
   Mr. Justice Sullivan

delivered the opinion of the court.

This action involving the trial of right of property was brought by plaintiff, David W. Raymond, against Albert J. Horan, Bailiff of the Municipal Court of Chicago, and Continental Distributing Company. Trial was had by the court without a jury. The court found that plaintiff was entitled to the right of possession of the property in question and to $12 damages for its wrongful detention. Judgment was entered on the finding and defendant, Continental Distributing Company, appeals from said judgment. Plaintiff has filed no brief.

Plaintiff’s statement of claim alleges that since October 10,1942 he has been the owner and entitled to the possession of certain personal property described therein; that “said property is now in the possession of Albert J. Horan, Bailiff of the Municipal Court of Chicago, who has seized and now holds the same by virtue of a levy made by him under a writ of execution issued out of the Municipal Court of Chicago” on April 1, 1943, “upon a judgment of that court for the sum of $378.29 and costs entered on March 26, 1943, in favor of Continental Distributing Co., a corporation and against Forrest Coburn, doing business as Co-burn’s Tavern;” and that said property is of the value of $2,000.

There is no dispute as to the facts. Forrest Coburn was desirous of embarking in the saloon and restaurant business at 112 South Clark street. There were saloon and restaurant fixtures and equipment in said premises owned by the Century Finance Company. On October 10, 1942 Coburn purchased such fixtures and equipment with $2,000 lent to him by plaintiff Raymond. Thereafter on the same day, Coburn executed and delivered to Raymond a bill of sale covering said fixtures and equipment and as part of the same transaction Raymond sold them back to Coburn under a conditional sale contract, which provided for semiannual payments of $250. It is admitted that the sale by Coburn to Raymond and the conditional sale by the latter to Coburn were made for the sole purpose of securing the loan of $2,000 made by Raymond to Co-burn to enable the latter to purchase the property from the Century Finance Company. Defendant, Continental Distributing Company, procured its judgment against Coburn on April 1, 1943 and pursuant thereto execution issued and the levy was made by the bailiff on the fixtures and equipment involved herein.

A conditional sale contract contemplates a bona fide sale made by a vendor to a vendee and a conditional bill of sale cannot be used to secure the interest of one who though purporting to sell personal property merely lends money to facilitate its purchase from a third person. Judicial sanction cannot be given to the employment of a conditional sale contract for the purpose of securing a loan made on personal property or for the purpose of securing a loan made to enable a purchaser to buy personal property from a third person. In Hughbanks, Inc. v. Gourley, 12 Wash. (2d) 44, 120 P. (2d) 523, 138 A. L. R. 658, a leading case on the subject, the factual situation was almost identical with that in the instant case. There the court said at pp. 525 and 526 of the first mentioned report:

‘ ‘ This court has held that it is not the office of a conditional bill of sale to secure a loan of money. Its purpose, rather, is only to permit an owner of personal property to make a bona fide sale on credit, reserving title in himself, for security, until the purchase price is fully paid. Lyon v. Nourse, 104 Wash. 309, 176 P. 359. This particular security device, with its severe remedial incidents, is not favored in the law and its use has been restricted to situations where persons standing in the actual relation of vendor and vendee have desired to effect a credit sale. It is in such cases that it find's its only legitimate use.
“Where, on the other hand, one who is the owner of a particular chattel wishes to borrow money and is willing to let the chattel stand as security for his debt, a chattel mortgage is the appropriate means for affording such protection to the creditor. And this is as true where the property mortgaged is purchased with the borrowed funds as where it has long been in the borrower’s possession.
‘1 Cases have arisen in this state in which attempts have been made to employ a conditional bill of sale to secure the interest of one who, though purporting to sell the chattel involved, merely lends money to facilitate its purchase from a third person. But this court has uniformly refused to sanction such a misuse of the conditional bill of sale. . . .
“The cases above discussed or cited establish the rule that any attempt to employ a conditional bill of sale for the purpose of securing money lent will not receive judicial sanction, regardless of the intention of the parties so to use it. The problem is not one of determining whether the parties intended to mould their transaction into the form of a conditional sale rather than that of a chattel mortgage, but of deciding whether in a pure financing arrangement the conditional sale can ever be adopted as a means of securing a loan. And the answer is that the contract of conditional sale may be used only by an actual vendor in the economic sense, and not by one who in a particular transaction occupies the status of a financier or lender of money, even though the latter may go through the form of taking title and possession of the chattel which he purports to sell, as respondent has done in this case.”

We are impelled to hold that since the sole purpose of the transaction between plaintiff and Coburn was to secure the payment of the loan made by Raymond to Coburn, the conditional sale of the property by Raymond to Coburn and the secret lien thereby retained were ineffective under the law as against any rights third persons might have in and to said property and that the right of defendant Continental Distributing Company under its judgment and execution against Coburn to the possession of the property is superior to any right plaintiff might have therein.

For the reasons stated herein the judgment of the municipal court is reversed and the cause is remanded with directions that judgment be entered declaring that the defendant, Continental Distributing Company, has the right to the possession of the property set forth and described in plaintiff’s statement of claim.

Reversed and remanded with directions.

Friend, P. J., and Scanlan, J., concur.