author: Tuley, J.:—

text:
      (Circuit Court of Cook County. In Chancery.)

    The Heirs of Hiram Hastings, Deceased, vs. Daniel G. Dorrance and William D. and Erwin D. Messenger and Wives.
    1. Homestead — When Right of Ceases. The mere fact that a party involuntarily ceased to occupy a homestead does not show that he intended to abandon the same. The presumption of the law is to the contrary.
    2. Homestead Exemptions — Assertion of Laches Does Not Run Against. Inasmuch as the law exempts the homestead it is unnecessary for the debtor to manifest any intention to avail himself of its benefits. The ordinary rules of laches are. also inapplicable.
    3. Sale of Homestead — Not in Compliance With Statute. The sale of a lot of' ground occupied as a homestead, where the sale is not had in accordance with the homestead law, is inoperative and void and passes no title.
    4. Same — Voluntary Conveyance Without Release of Homestead. The voluntary conveyance of the homestead lot, without release of the homestead as provided by the homestead act, passes a title which becomes operative upon the abandonment of the homestead, and where the lot is worth more than $1,000, it passes the title subject to the homestead. There is a distinction between the case of a voluntary conveyance and a conveyance by operation of law.

      5. Judicial Sales — Equities Arising Out of. No equity can arise out of a purchase at a void judicial sale.
    6. Judicial Sales — Lien on Homestead — Excess Over $1,000. The statutory right to subject the excess over $1,000 in a homestead to the satisfaction of a judgment does not constitute the judgment a lien on such excess.
    7. Same — Lien as to Excess — General Statute. Nor does any such lien exist under the general statute as to judgments.
    8. Statutory Construction — Mode Prescribed by Statute Exclusive. Where the statute specifies the particular mode in which a lot of ground used as a homestead may be sold, all presumption that the legislature intended it should be sold in any other way is excluded. » 9. Judicial Sales — Purchaser at, Acquires No Equitable Title. A purchaser under an execution sale which is merely a statutory proceedings, acquires no equitable title.
    10. Equitable Title — DeFiNED. An equitable title is where one has the right by reason of some equitable doctrine to demand a conveyance of the legal title to land held by8, another.
    11. Homestead — Execution Sales of Under — Not in Compliance With Statute — Bight of Purchaser to Have Homestead Set Off or if Indivisible to Compel Debtor to Accept $1,000. Where a sale by execution is had of a lot of land occupied as a homestead, which sale was not had in accordance with the statute in relation to homesteads, the court will permit the purchaser to have the homestead set off as against the judgment debtor, or if indivisible to be declared the absolute owner upon the payment of $1,000 to the judgment debtor.
    12. Homestead — Sale Under Execution at a Sacrifice Not in Accordance with Statute. If property subject to a homestead is sold at a sacrifice, by reason of the irregularity of" selling without setting off the homestead, the purchaser should permit his sale to be set aside upon the payment of his judgment.
    13. Same — Bights of Subsequent Purchaser. But where the purchaser re-sells the property to a tona fide purchaser, the court will permit the setting aside of the sale on the condition that the judgment debtor place the subsequent purchaser in statu quo.

    14. Judicial Sales — When Set Aside for Irregularities. Where the judgment creditor sells a lot of land subject to a homestead, the fact that it is susceptible of division into two parts and should have so been offered for sale by the sheriff when taken into connection with the fact that the judgment creditor failed to notify his debtor that the homestead in which he had a large equity had been sold, makes such a case of wrong oppression and inequitable conduct on the part of the creditor that when taken into connection with a gross inadequacy of price, calls loudly to a court of equity for relief.
    15. Judicial Sales — Purpose of. The object of the statute in per- . mitting a sale of real estate upon a judgment, is to enable a creditor to collect his debts, and not to enable'him to speculate off his debtors misfortunes.
    Bill and amended bill. Cross-bill and bill of review. Heard ■before Judge Murray F. Tuley. The facts are stated in the -opinion.

      F. W. Forch, Jr., solicitor for complainant.

      Sleeper & Whiton, solicitors for defendant Dorrance.

      Pliny B. Smith, solicitor for defendants Messenger.
   Tuley, J.:—

In 1843 Hiram Hastings purchased the E. % of lot 2, block ■5, frac. sec. 15, addition to Chicago, and occupied the same .as a homestead until the buildings thereon were destroyed by the big fire of 1871.

In the fall of 1875 he commenced the erection of the present building thereon, and before its completion occupied a portion of it for his homestead until his decease in the year 1880. Since then his widow has been and is now occupying "the same, claiming homestead rights therein.

In the superior court of Cook county, on the 12th day of •January, 1876, Edwin D. Messenger obtained a judgment against Hastings and sold the said E. % of lot 2, May 6, 1876, with the buildings, for the sum of $350, that being the amount •of the judgment, interest and costs. The building on' the lot covered the entire front, was four stories in height and in appearance was two distinct buildings of 40 feet front each, with stores below and separate entrances and stairs leading to the upper stories. Although the property had been mortgaged as two separate 40 feet lots, and was clearly susceptible of a division into two parts, it was sold en masse and without regard to the homestead rights of Hastings, if any he had. "Whether or not Hastings had a homestead in this property at the date of this judgment is about the only question of fact in this- ease..

"Without going into any analysis of the evidence, I will only state my conclusion, which is, that he had at that date a homestead right in the lot and buildings thereon. His ceasing to live there in 1871, was involuntary, and his intent to retain the lot as a homestead must therefore be presumed. Although there is some evidence to show an abandonment, yet the weight of evidence tends to aid the presumption of the law of an animus revertendi. Howard v. Logan, 81 Ill. 383. My conclusion also is, that he was actually occupying the new building as a homestead at the date of the judgment.

On the 18th day of August, 1877, the execution sale ripened into a deed to Edwin D. Messenger, the purchaser at the sale. He quitclaimed an undivided three-fifths interest to his partner, William D. Messenger, on the 20th day of August, 1877, and the two joined in a deed to the defendant Dorrance, on the 30th of same month, which was filed for record in a few days thereafter. The consideration of the last mentioned deed was $2,123.42 cash, and the balance of the consideration of $13,000, was prior indebtedness.

The sheriff made a demand of payment before the levy, but there is no evidence to show that Hastings knew of the levy and sale or subsequent deeds thereunder, until a few days after the record of the deed to Dorrance.

This bill was forthwith filed by Hiram Hastings, to set aside the levy, sale, sheriff’s deed and the subsequent deeds as clouds upon his title, upon the ground that the premises were occupied as a homestead, and none of the requirements of the statute as to the appointment of commissioners to set off the homestead, etc., having been complied with, the same was unauthorized and void; and also upon the further ground that the sale was irregular inasmuch as it was sold en masse, when it was susceptible of division into two parcels.

The defendant Dorrance files a cross-bill and offers to pay $1,000 for the homestead interest, if the court finds there was a homestead interest, and prays that he may be declared the owner of the property free therefrom.

The following questions of law arise:

1st. The lot of ground being occupied by Hastings as a homestead, and none of the requirements of the homestead act having been complied with, was the sale unauthorized and void, and therefore failed to pass any right, title or interest to the purchaser at that sale?

2d. The equity of Hastings in the property — the same being under mortgage — being of the value of $25,000 at the time of the sale, is Dorrance entitled to the relief prayed by his cross-bill?

"3d. If the sale passed the title to the property subject to the $1,000 homestead interest — does the fact that the sale was en masse and not in parcels entitle the complainants to have the sale and deeds set aside as against Dorrance, and if so, upon what terms?

4th. Have the complainants been guilty of laches?

It is evident that the decision of the first point in, favor of complainants would render it unnecessary to decide the others, for if the execution sale was made without regard to the requirements of the homestead act, and therefore the sheriff’s deed passed no title or interest in the property, it would be immaterial whether the sale was en masse or not. There could be no laches in asserting the exemption from levy and sale of the lot of ground occupied as a homestead.

“The law exempts the homestead, and the debtor is required to perform no act, to discharge no duty, nor even to manifest any intention to avail himself of its benefits. Hence the ordinary rules as regard laches, in parties failing to make their defense at law, or to bring suit in a reasonable time, are not applicable when homestead exemption claims are asserted.” Hubbell v. Canady, 58 Ill. 425; Pardee v. Lindley, 31 Ill. 174, 186.

As to the effect of this sale under the execution, some thirty odd decisions have been cited, and I have studiously examined them all, and others not cited. I find that in the following cases bills have been filed to set aside sales under judgment, because the provisions of the homestead act were not complied with in making the sale, and the relief prayed for was decreed. Green v. Marks, 25 Ill. 221; Hume v. Gossett, 43 Ill. 297; Conklin v. Foster, 57 Ill. 104; Hubbell v. Canady, 58 Ill. 425. The sale was set aside on motion in Stevenson v. Maroney, 29 Ill. 532, and the right to have it done on motion recognized in Haworth v. Travis, 67 Ill. 301. In Kerr v. South P’k Comrs., 8 Bissell, 276, s. e. Fed. Cas. No. 7733, an execution sale of homestead was held void, on the authority of Hartwell v. McDonald, 69 Ill. 293. Sales were set aside upon bills filed in the following cases where there had been sales; under foreclosure decrees, and in many of them the decrees; went by default against the homestead claimant. Hoskins v. Litchfield, 31 Ill. 137; Mooers v. Dixon, 35 Ill. 208; Cummings v. Burleson, 78 Ill. 281; Muller v. Inderreiden, 79 Ill. 382; and on motion in Moore v. Titman, 33 Ill. 57.

In Green v. Marks, supra, the court says, “The legislature intended not only to free it (the lot of ground) from liability to sale, but from all lien while it remains a homestead.” In Hoskins v. Litchfield, supra, where there had been a sale under a foreclosure decree without appointment of commissioners, etc., as required by the homestead act, the supreme court affirmed the decree of the lower court, “that the said premises stand in all respects as if no proceedings had been had under the mortgage.”

In Moore v. Titman, supra, the court held that: If the premises ordered sold are worth more than $1,000, the master must proceed like a sheriff on execution to sell in the manner provided by the statute. In Mooers v. Dixon, supra, after decreeing that the sale and the deed thereon be set aside, the master was ordered “to proceed to sell the premises in the mode pointed out by the homestead act.”

In Conklin v. Foster, supra, the premises were worth more than $1,000. There were two judgments, and the premises were sold under the senior judgment, and afterwards the, owner of the homestead sold the premises to the junior judgment creditor. It was held, that “property thus situated is not liable to sale, and no lien by virtue of a judgment attaches to it,” and “that the junior judgment creditor took the property free from all lien of the first judgment; a sale,” says the court, “of such property being inoperative, the purchaser thereat takes no title.”

In Hartwell v. McDonald, 69 Ill. 293, where the premises sold were worth more than $1,000, the court says: “It is not 'the mere homestead right of occupancy which is exempted from levy and forced sale, it is the lot of ground occupied as a residence. This court has uniformly held that a judgment is not a lien upon homestead premises. * * * It has been held that the property is neither subject to a lien, a levy1 or a forced sale under judicial process while occupied as a homestead; that it does not vary the result whether the premises are worth more or less than $1,000, that if not worth more than that sum, the sale is prohibited, and if worth more, then none of the requirements of the statute having been observed in making the levy and sale, the sale is unauthorized, * * * property thus situated is held not liable to levy and sale on execution and such sales are held to be inoperative and void and that the purchaser acquires no title thereunder.” And then cite with approval the case of Green v. Marks, supra, and nine other decisions of our supreme court as supporting the position taken.

The case of Hartwell v. McDonald is cited with approval in Hartman v. Schultz, 101 Ill. 437. And, it is again held, that “it is the lot of ground occupied as a residence which is exempt,” and that where premises are not susceptible of division and exceed in value $1,000, “a sale * * * is invalid unless the provisions of the statute * * * are complied with” in making the sale.

It would seem that no language could be clearer or more positive than that used in the cases last cited, and that there should be no doubt but that the sale of a lot of ground — without regard to its value — occupied as a homestead where the sale is not had in the manner provided by the homestead law, is inoperative and void and passes no title.

There are, however, decisions of our supreme court, which, it may be argued, hold that where the homestead lot exceeds in value $1,000, a valid sale may be had of the excess of value over $1,000, without appointing commissioners or complying with the other provisions of the homestead act.

Among those decisions are a certain class growing out of voluntary conveyances of the homestead lot, without in the deed or instrument conveying the property, releasing the homestead in the manner provided by the act. Of this class are McDonald v. Crandall, 43 Ill. 231; Coe v. Smith, 47 Ill. 225; Hewitt v. Templeton, 48 Ill. 367; Mix v. King, 55 Ill. 434; Eldridge v. Pierce, 90 Ill. 474; Hotchkiss v. Brooks, 93 Ill. 386.

These decisions lay down the principle that a voluntary conveyance of the homestead lot, without release of the homestead as provided by the act, passes a title which will become operative upon the abandonment of the homestead, and in case the lot is worth more than $1,000, it passes the title subject to the homestead.

The supreme court of the United States in Black v. Curran, 14 Wall. 463, in a case involving-a title derived through an execution sale, (in Illinois), made without setting off the homestead, held, that the fee passed subject to the homestead, and comment on Hewett v. Templeton and McDonald v. Crandall, supra, and Coe v. Smith, 47 Ill. 225, and say “if a conveyance by the occupant of the homestead, without the release of his right as required by law, has the effect to pass the title, regardless of the value of the premises conveyed and can be enforced so soon as the occupation of the homestead ceases, it is difficult to see why the conveyance by the officer of the law instead of the debtor should not have the same effect.”

“And if as between two voluntary grantees, the first takes the land discharged of the homestead after its abandonment, although the second conveyance contains a release of the homestead and the first does not, why should not the same rule obtain when the property was sold on judicial process before the debtor conveyed it, * * * the only difference between a conveyance made by the judgment debtor who has a homestead, and by a sheriff under a sale on execution against the land, is, the one is the act of the party, the other, ■of the law — one a voluntary, the other an involuntary conveyance.”

But in the case before cited of Hartwell v. McDonald, 69 Ill. 293, where precisely the same question was before our court as in Black v. Curran, 14 Wall. 463, our supreme court comment upon, and expressly disapprove of that case and say, “Our court has always made a marked distinction between cases of voluntary conveyances by the homestead occupant, and those of compulsory conveyance by the officer of the law,” * * * and also that “it has been held that the property is neither subject to a lien, a levy, or a forced sale under judicial process while occupied as a homestead ; that it does not vary the result whether the premises are worth more or less than $1,000; that if .not worth more than that sum, the sale is prohibited by the statute, if worth more, then, none of the requirements of the statute having been observed in making the levy and sale, the sale is unauthorized,” and cite, as supporting that doctrine, the following decisions of the court: Green v. Marks, 25 Ill. 221; Fishback v. Lane, 36 Ill. 437; Silsbee v. Lucas, Id. 462; Blue v. Blue, 38 Ill. 9: Bliss v. Clark, 39 Ill. 590; Wiggins v. Chance, 54 Ill. 175; Hoskins v. Litchfield, 31 Ill. 139; Moore v. Titman, 33 Ill. 357; Wing v. Cropper, 35 Ill. 256; Conklin v. Foster, 57 Ill. 104.

In addition to the decision of the U. S. Supreme Court in Black v. Curran, 14 Wallace supra, we have the following cases which are relied upon by the cross-complainant, Dorranee, as holding that there may be a valid sale of the excess in value over $1,000 without first setting off the homestead and, thát being so, that he is entitled to the relief prayed by this cross-bill.

The first is Loomis v. Gerson, 62 Ill. 11, in which it appears there was a judgment on fine of $200 against the occupant of homestead, and upon execution the homestead was levied upon and sold upon the 21st of May, 1869, to Gerson, and two days after the sale, the judgment debtor sold the homestead premises to Loomis for $1,800. Gerson’s purchase ripened into a deed, and he paid off two mortgages upon the property. Loomis, the grantee of the homestead occupant, filed his bill to have the sale under the execution and sheriff’s deed to Gerson set aside and declared void; upon the ground, that the premises at the time of the sale were a homestead, and that the requirements of the homestead act had not been complied with in making the sale. There was a demurrer to the bill which was overruled, and decree setting aside the sale. The supreme court holds that the circuit court did right in overruling the demurrer, and say, “the sale, however, should not be absolutely set aside. All that the judgment debtor has a right to claim is $1,000, and if the defendant prefers to pay that sum to the complainant, who stands in the shoes of the judgment debtor, he should be permitted to do so, and retain the title. For error in setting aside the sale absolutely the decree is reversed.”

The case at bar would seem to be a parallel one to Loomis v. Gerson, except that in this case there are no mortgages paid off by the purchaser at execution sale. The decision in Loomis v. Gerson is not made to turn upon the right of subrogation, if any, or upon any equity growing out of the payment of the mortgages. In fact it would be difficult to see how that could make any difference in the rights of the holder of the execution title, if the mortgages were paid without the knowledge or consent of the person purchasing from the occupant of the homestead. The purchaser at the execution sale, either took title by such purchase or he took nothing, and it is difficult to see how he could take any title or interest by a purchase at a sale made without the requirements of the homestead being complied with, when such a sale was in the language of the prior decisions of the court unauthorized and void. How any equity could arise out of a purchase at a void judicial sale, it is rather difficult to discover.

This decision of Loomis v. Gerson was recognized in Stevvens v. Hollingsworth, 74 Ill. 202, an ejectment suit -based on a title derived through an execution sale, where the court says, “Where a bill in chancery is filed to set aside a sale, on the ground that the property sold was the homestead of the complainant, the chancellor may, undoubtedly, in the exercise of the equitable powers with which he is invested, cause the property to be divided and set aside the sale only as to so much as shall be found, if the property be divisible, of the value of $1,000: or require the complainant, if the property be not susceptible of a division, to accept the $1,000 for his homestead, if the purchaser shall elect to retain it and pay the amount, as has been held in Loomis v. Gerson, supra.

Loomis v. Gerson cites no authority, Stevens v. Hollingsworth, in addition to Loomis v. Gerson cites Linton v. Quimby, 57 Ill. 271, which does not appear to be in point as the only question there was, whether the court below erred in refusing to set aside the sale as to four other lots, sold with the homestead lot, each lot having been sold separately. The court below did set aside the sale as to the homestead lot, although the evidence showed a value of $3,500 — or in other words a “surplus” of $2,500.

The remaining case relied on by defendant is that of Leopold v. Krause, 95 Ill. 440.

The homestead had been sold on execution, the homestead act not being complied with in making the sale. The purchaser filed a bill to set aside certain deeds made by the judgment debtor as fraudulent and asked to be declared the absolute owner, the answer was, that the premises were a homestead, and the reply in argument was, that the homestead right was forfeited by the making of the fraudulent conveyances. The court after commenting on Hartwell v. McDonald, as holding such a sale void, say, that it was an action at law and followed the prior decisions of the court, which held, that the fee did not pass by such a sale; that “everything contained in that opinion must be limited in its application and meaning by a consideration of the case then under discussion;” that “the relief which may be had in a court of equity was not then under consideration,” but was, in Loomis v. Gerson, 62 Ill. 11, and after quoting from that decision the court say, that Loomis v. Gerson was referred to with approval in Stevens v. Hollingsworth, 74 Ill. 202, and quote the language of - the latter ease, as hereinbefore recited; that the rule established in those two cases has never been directly disapproved or criticised since it was first announced; that “even were we dissatisfied with those cases, still they have become a rulé of property, and we should hesitate to overrule them. But upon reconsideration of the question we think they are sustained by reason. A careful examination of the language of the statute will show, that it prohibits a sale of the homestead only to the extent of the $1,000 in value, and contains no prohibition of the sale of the surplus over and above that amount. * * * The provisions, as to the manner in which an execution sale is to be made, are simply directory and not prohibitory. It is not declared that a sale without setting off the homestead shall be null and void. Undoubtedly the debtor may insist upon the statute being complied with, and may in apt time, no doubt, apply to a court of equity to set aside the sale whenever a noncompliance with the statute has injuriously affected him.” The opinion then argues that the provision of the statute requiring the homestead -to be set off is manifestly principally for the benefit of the judgment creditor, and suggests that such sale may pass an equitable title in the surplus of value and entitle the holder thereof to file a bill for setting off the homestead, or the appointment of commissioners to make a division “and perhaps for other equitable relief, yet this bill seeks no such relief;” that there is no prayer to set off the homestead, no offer to pay $1,000; that “the complainant has come for the aid of a court of equity, he should have it only on equitable terms, * ’* * if by reason of the irregularity of selling without having the homestead set off, the property was sold at a sacrifice, complainant should permit his sale to be set aside upon payment of his judgment, if the parties in interest in the land are willing to pay the same.”

I have reviewed and quoted thus liberally from the supreme court decisions, that it may be seen how irreconcilable they are. It is another illustration of the dilemma in which the nisi prius judge often finds himself in attempting to arrive at a conclusion" from the decisions of our supreme court. If I decide in favor of the principles land down in the first and by far the most numerous class of the decisions referred to, complainants are entitled to a decree setting aside the sale of this property upon the payment of $350 with interest. If I decide' in favor of the principles declared in the three decisions last mentioned, the defendant, Dorrance, is entitled to this property of the net value of $25,000 to $30,000 upon the payment of $1,000.

Does the fact, that the act of 1873 created an estate of homestead, whereas the prior acts only recognized an exemption, make any difference as to the principles of law, or the decisions governing the ease? A construction of the new statute of 1873, is found in Hotchkiss v. Brooks, 93 Ill. 386, which was a bill filed by Hotchkiss against Sarah Brooks, to have her homestead interest in a lot which he acquired by deed from her husband, set-off, and if the property was not divisible, then that appraisers might be appointed, and if the appraisement should exceed $1,000, then that defendant be required to take $1,000 and surrender possession. Brooks had separated from his wife and abandoned the homestead. The property was appraised at $4,750, and decree went in favor of complainant. The supreme court say “It is true the right conferred upon a party who occupies a tract or lot of ground as a homestead, under the act of 1857, was a mere exemption, and it is also true, that, by the act of 1873, an estate of homestead was created; but, aside from the fact that one is called an exemption and the other an estate, it might be difficult to determine the difference between the two, in so far as the rights and privileges conferred upon appellee in this case are concerned. Under the one statute, the rights conferred seem to be as great as under the other; and we perceive no reason why a decision made under the old statute would not be applicable under the new one.”

The year before the decision last quoted, to wit: in 1878, Justice Scholfield in Eldridge v. Pierce, 90 Ill. 474, reviews the two acts of 1857 and 1873, in a very able manner, pointing out the effect of the change from an “exemption” to an “estate” of homestead. In that case, the occupant of the homestead lot made a mortgage without release of the homestead right, and subsequently made two other mortgages with release of homestead right. He subsequently surrendered possession to the last mortgagees. A bill, was filed by first mortgagee to foreclose, who alleged that there had been an abandonment of the homestead and that therefore the second mortgagees were in all respects subordinate to his. The court referred to the prior statutes exempting from levy and forced sale, the lot occupied as a homestead and say “it was held that this did not create a new estate, but simply an exemption; and where the holder of the homestead conveyed without relinquishing the exemption, he transferred the fee, but the operation of the deed was suspended until the premises were abandoned or possession was surrendered.” McDonald v. Crandall, 43 Ill. 231; Coe v. Smith, 47 Ill. 225; Hewitt v. Templeton, 48 Ill. 367; Hartwell v. McDonald, 69 Ill. 293. And also, “that the exemption did not affect the rights of heirs or devisees,” citing: 70 Ill. 263, 72 Ill. 24, 80 Ill. 84, and 76 Ill. 541. “The phraseology of the act in force July 1, 1873, leaves no room for doubt,” says the court, “that the general assembly designed to change the law in both these respects. To meet the objection that the former acts created no new estate, it expressly declares that ‘every householder,’ etc., shall be entitled to an estate of homestead to the extent in value of $1,000 — thus creating a new estate; and, to meet the objection that the former exemption did not affect the rights of heirs and devisees, it declares that such homestead (i. e. the estate of homestead to the extent in value of $1,000) shall not only be exempt from attachment, judgment, levy or execution, sale for the payment of- debts, or other purposes, but that it shall also be exempt from the laws of conveyance, descent and devise, except as therein provided.”

After commenting on the change made by the 4th and 6th sections, the court proceeds, “it would be difficult to employ language more clearly expressing that the householder is now invested with an estate, (one before unknown to the law of homestead), to the extent in value of $1,000, which can only be incumbered or aliened in the mode prescribed by the statute. Where the property in which this estate exists exceeds in value $1,000, the excess is plainly unaffected by the estate, that is to' say, the excess is liable to the same lien of judgment, attachment, etc., and to be aliened in the same manner that other real property of the householder is. Where, however, the property does not exceed in value $1,000, the estate embraces the entire title and interest of the householder therein, leaving no separate interest in him, to which liens can attach or which he can alien, distinct from the homestead.” Also “that abandoning or surrendering possession pursuant to the conveyance of the property, is not an abandonment of the estate of homestead.”

In the case of Browning v. Harris, 99 Ill. 456, which was a bill to foreclose a mortgage; there was no release of homestead property worth less than $1,000, and no possession was. given, nor was there any abandonment. Justice Mulkey reviews the new act, the effect of the change of the exemption to an estate, and affirms the doctrine of Eldridge v. Pierce,. 90 Ill. supra.

Without desiring to criticise the supreme court, it appears; to me that some confusion has arisen, in the decisions made-under the homestead act, as it existed prior to 1873, by the-statement in some of the decisions, of a principle unnecessary to the case before the court: — That where the value of the-lot occupied as a homestead, exceeded $1,000, a judgment was-a lien upon the 11 excess ” or “ surplus ” or “ residue ” or “ over-plus,” over and above $1,000, as in McDonald v. Crandall,. 43 Ill. 231; Haworth v. Travis, 67 Ill. 301, and others. If' the judgments were a lien on the lot of ground, if worth more-than $1,000, why were they not a lien and capable of enforcement in. the order of their priority, when the lot of ground worth less than $1,000 was abandoned as a homestead ? Our supreme court following the logical sequence of the doctrine declared in Green v. Marks, held where there were two judgments and the debtor abandoned the homestead, not the senior-judgment, but that the junior judgment creditor who had' made the first levy would be entitled to priority. Bliss v. Clark, 39 Ill. 590.

Whatever may be the effect of the change of the law making-what was before an “exemption” an “estate of homestead”' as to the “excess” in value over $1,000, I.think it must be-conceded, that it was not correct to call the statutory right to subject, in the manner pointed out by the statute, this; “excess” or surplus value to the satisfaction of the judgment a lien upon such excess or surplus.

It was no more a lien than is the right of a mechanic to-enforce a claim against a building, a lien, until it is judicially ascertained and declared to be such, — it is no more a lien than is a judgment in Cook county a lien on lands of the debtor in Kane county, yet the latter may be sold upon the judgment in the mode pointed out by the statute; or than is; a judgment a lien on personal property.

As Justice Walker says, in the leading and very able decision upon the homestead law, Green v. Marks, supra,. the only right to proceed against the lot of ground occupied as a homestead is given by the statute and “the statute is, silent as to any lien.” The proceeding to sell the lot of' ground occupied as a homestead is purely a statutory proceeding.

The title to land could not be divested by any proceeding upon a judgment at common law, and the right to divest a debtor of his title to the lot of ground occupied as a residence where its value exceeds $1,000, being a purely statutory right, the mode pointed out by the statute and none other, must be pursued.

Nor does the fact that the new statute creates an estate of homestead in my opinion make a judgment a lien on the excess of value over $1,000. The general assembly in passing the act were legislating as to the manner in which the lot of ground occupied as a homestead might be aliened, pass by devise or descent, or be sold upon judgment or decree, and as to the best means of preserving the homestead to the debtor,, his wife and family.

Having failed to declare a judgment or decree to be a lien on the lot or any portion of it, it can only become a lien on the excess' or surplus value by virtue of the general statute making judgments and decrees liens upon all the real estate of the debtor, but where the legislature singles out particular property and legislates as to that, can it be said that the statute provisions as to liens on the real estate generally of all debtors shall be held to apply to that particular property ? I think not! If the lien arises as to the surplus value by reason of the general statute as to judgment liens, I can not see why — as the homestead interest is a conditional estate liable to cease upon abandonment — the judgment is not also a lien upon the fee, subject to the homestead-, without regard to the value- of the homestead.

It does not, however, necessarily follow that if the judgment is a lien on the interest of the debtor, which is' in excess of $1,000, the value of the homestead interest, that such property or such excess can be sold in any other manner than that provided by the homestead act.

A specification of the particular mode in which the ?ot of ground used as a homestead may be sold on execution, -where its value exceeds one thousand dollars, excludes all presumption that the legislature intended it should be sold in any other manner.

It will be noticed, that while the general assembly changed the old law by creating an estate of homestead in place of an exemption, yet in those section (now sections 9, 10, 11 and 12 of the law of 1873) relating to the sale on execution where premises occupied as a homestead exceed in value $1,000, no change was made. . All the prohibitions against the sale of the lot for a less sum than $1,000, and all the requirements as to setting off the homestead, if it can be done — if not, then the appraisement to be made; notice to be given to the debtor to pay on the judgment the excess of appraisement over $1,000 within sixty days — all remain in the new law precisely as-in the old law.

In this regard the decisions under the old statute holding the sale, without complying with the homestead act, to be unauthorized and void and to pass no title, are just as applicable under the present statute as under the prior ones. While there is some language in the opinions in Eldridge v. Pierce, supra, and Browning v. Harris, 99 Ill. 456, construing the new homestead act of 1873, which appears to be to the effect, that the surplus value may be sold without regard to the homestead act, yet in both those cases the conveyances were voluntary, and the question as to the right to sell the surplus ’without first setting off the homestead, or if indivisible, having an appraisement, etc., was not before the court.

- I confess that I am utterly unable to comprehend the equities and equitable rights which the court appear to desire to establish in the.three easés in the 62, 74 and 95 Illinois. I can not understand how a purchaser under an execution sale, purely a statutory proceeding, can acquire an “equitable title” to the surplus in value over $1,000. It appears to me, that where a judgment debtor has a legal title to land, that the title acquired by a purchaser at an execution sale of that land must, be a legal title and can not be an equitable title. He acquires a legal title, or he acquires no title. A legal title passes or no title passes. An equitable title is where one has the right by reason of the application of some equitable doctrine to demand a conveyance of the legal title to-land held by another. As for instance, where a guardian has purchased property of his ward the day after he acquires his. majority; and where one buys land, supposing he is acquiring the legal title, and the owner of the legal title silently and fraudulently stands by and sees him make the purchase.

What equitable maxim or doctrine can be' invoked, which will make the sale of the homestead lot which is an unauthorized and void act, passing no title when the purchaser seeks, to enforce it in a court of law, 69 Ill., a valid and authorized act passing an equitable title, 62 Ill., when the purchaser comes in to a court of chancery? How can any equity arise from er be founded upon, a violation of statutory provisions ?

■ This doctrine that a sale of the lot occupied as a homestead,,, without setting off the homestead carries the title subject to. the homestead right of $1,000, asserted in Loomis v. Gerson, and Stevens v. Hollingsworth, supra, is declared in Leopold v. Krause, supra, to have become a rule of property, — what am I to do with exactly the opposite rule of property declared in more than a score of decisions commencing with Green v. Marks, supra, and ending with Hartwell v. McDonald, supra, and recognized and reaffirmed ‘as good law in a case still later than the 95 Ill., to wit: Hartman v. Schultz, 101 Ill. 437.

It is a noticeable fact that in each of the three cases of Loomis v. Gerson, Stevens v. Hollingsworth and Leopold v. Krause, so much of the opinion as is in opposition to the hitherto well established rule of property, that such a sale as: was made in this case is unauthorized and void, will be found upon examination to be obiter of the court, or at least, so much in the nature of obiter as not to demand that it be followed, certainly not, in opposition to the long line of cases •cited, ante, holding a contrary doctrine. In Loomis v. Gerson, the owner of the homestead after judgment had sold the property, and the purchaser applied to have the sale set aside absolutely. In Leopold v. Krause, supra, the bill was filed hy a purchaser under execution to set aside certain conveyances made by the homestead occupant, as fraudulent, while the other ease of Stevens v. Hollingsworth, was an action of ■ejectment, and the question as to what relief could be had in equity was not before the court.

So that as yet, the supreme court has never sustained a bill by a purchaser at an execution sale, made without following the requirements of the homestead act, seeking as against the judgment debtor, to have set off the homestead, or if indivisible, to be declared the absolute owner, and entitled to possession on the payment of $1,000. Until the supreme ■court has sustained a decree granting that specific relief, I do not feel called upon to follow the doctrine laid down in the three cases commented upon, in opposition to the rule of property established by so many of its other decisions, and-so much opposed to my own judgment.

The case of Kerr v. S. P. Com’rs, 8 Bissell, 276, Fed. Cas. No. 7733, was upon a bill in chancery, and in that case the U. S. court followed Hartwell v. McDonald, supra. That decision has since been affirmed by the supreme court of the United States, and as before stated, our own supreme court have again recognized the doctrine of Hartwell v. McDonald upon a bill in chancery to set aside the sale of the homestead, in the ease of Hartman v. Schultz, supra.

The cross-bill in this ease will give the supreme court the -opportunity, upon a bill praying the specific relief, of deciding, whether on an execution sale, made without complying with the Homestead Act, the homestead occupant can be turned out on the payment of the $1,000.

The court in Leopold v. Krause, supra, has held in opposition toi a long line of prior decisions hereinbefore referred to, that the provisions of the homestead act, as to the setting off the homestead and the appointment of commissioners, where the value of the lot exceeds $1,000 are merely directory, and not mandatory, but have not held, that section 9 of the act which reads as follows: “No sale shall be made of the premises on such decree or execution unless a greater sum than $1,000-is bid therefor” is also merely directory'. The case of Hartman v. Schultz, supra, holds, that it is prohibitory of any sale, except for a greater sum than $1,000, and I think any court considering the strong language forbidding the sale in section 9, in’ connection with sections 10, 11 and 12, would be justified in this case, where the bid was only $350, in following Hartman v. Schultz, supra, rather than Leopold v. Krause, supra, and in pronouncing this sale void, passing no title.

But even if I felt compelled to follow Leopold v. Krause, relief might be granted the complainant in this cause. That case qualifies the doctrine of Loomis v. Gerson,. supra, and Stevens v. Hollingsworth, supra, by holding, that if the property is sold at a sacrifice, by reason of the irregularity of selling without setting off the homestead, the purchaser should permit his sale to be set aside upon the payment of his judgment. Not only was this property worth, net, $25,000 to $30,000, sold for $350, but no such sale, it can be supposed, would have been permitted by Hastings, had an appraisement been had, and the sixty days prior notice given to him, as provided by the homestead act. As Dorrance has purchased since the sheriff’s deed was made, having no other notice than that derived from the occupation of the Hastings, the relief could only be granted, on condition that the complainants pay him the amount of cash paid by him, $2,132, and interest, to which extent only would he be considered a bona -fide purchaser for value.

But I prefer to present the case to the supreme court, whether or not, such an execution sale is not both at law and in equity unauthorized and void and “passes no title.”

. As to the other points it is unnecessary to decide them; but I will say that I have carefully considered all the authorities cited, and am of opinion, that if the judgment creditor' could sell the lot of ground "subject to a homestead as this-was sold, the fact that it was susceptible of division into two parts, and should have been so offered for sale by the sheriff, when taken in connection with the fact, that a part of the building was occupied as a homestead and with the fact that the judgment creditor who became purchaser, carried on business within 200 feet of the lot sold, and knew Hastings, and saw him every few days, but failed to notify him that his homestead, in which he had an equity of at least $25,000, had been sold and bought in by him for $350, makes such a case of wrong, oppression and inequitable conduct on thé part of the creditor, that taken in connection with the gross inadequacy of price, calls loudly to a court of equity for relief. It is a case that falls clearly within the principles laid down by our supreme court in Morris v. Robey, 73 Ill. 462; Hay v. Baugh, 77 Ill. 500; Bradley v. Luce, 99 Ill. 234; Cassidy v. Cook, 99 Ill. 385. The object of the statute in permitting the sale of real estate upon a judgment, is to enable a creditor to collect his debt, and not to enable him to speculate off his debtor’s misfortunes.

Let the decree be prepared setting aside the execution sale and deeds issued upon and subsequent thereto; also setting aside the satisfaction of the judgment, and requiring the complainants to pay into court the amount bid at the sale, $350, with interest thereon, cross-bill to be dismissed; each party to pay his own costs.


source: Caselaw Access Project

author: Holdom, J.

license: Public Domain

text:
      (Superior Court of Cook County, In Chancery.)

    Bardeen Paper Company, et al. vs. The Western Coated Paper & Card Company, et al.
    (1903.)
    1. Corporations — Whether Stock Full Paid. Where half of the capital stock of a corporation is issued in payment for the right to use a patented process for the manufacture of which the corporation was formed, ■ it was held that in the absence of fraud the stock must be considered as full paid even though the patented process was of an uncertain value.
    2. Same. The fact that part of the shares of stock of a corporation taken in exchange for the right to use a patented process, were distributed among promoters as a bonus, does not show that there was a fraudulent overvaluation of the patented process.
    3. Directors — Fraud of — Personal Profit in Relation to Corporate Transactions. Where a director of a corporation receives; a number of the shares of the capital stock of the corporation; from the person to whom the same were issued in exchange-for certain patent rights, it was held that such shares were: the property of the corporation and the director must account for their value.
    4. Director — Dealing with Corporate Property fob His Own Benefit. While a director of a corporation is not a technical trustee, his relation to the corporation is a fiduciary one, and he cannot deal with the corporate property for his own benefit, or use it for his individual purpose.
    5. Salaries of Corporate Officers — When Illegal. Where a salary is voted to a corporate officer by his procurement, or where his vote is necessary to pass the resolution the action is void and such officer can be compelled to refund. (See note 3.)

      Dupee, Judah, Willard & Wolf, solicitors for complainants. James D. Andrews, of counsel.

      Rubens, Dupuy & Fischer, solicitors for defendants.
   Statement.

Holdom, J.

The complainants, judgment creditors of the defendant corporation, whose judgments remain unpaid, and upon each of which executions have been duly returned by the sheriff unsatisfied, have brought this bill under section 49 of the chancery act and paragraph 8 of the corporation act, being a creditor’s bill, upon the theory that the defendants Schmidt, Marquis and Pagenstecher are indebted to the défendant corporation for unpaid stock subscriptions and for money due to the corporation for salaries received by them as president, vice president and treasurer, respectively, under a void resolution passed by the board of directors of the company Jan-nary 9, 1893. Pagensteeher has since deceased and the bill abates as to him.

Prior to February 9, 1891, Joseph Kayser had invented a process for coating paper on both sides, and had procured letters patent upon the same from the United States, number 445955. On that date his' wife, Johanna Kayser, she being the owner, entered into a contract with Joseph Sachs and John W. Krueger to the effect that if they would, on or before the 9th of September, 1891, procure a corporation to be formed with a capital stock of $100,000, and procure $50,000 in cash to be paid to such company as part of its capital, and also procure $50,000 of the shares of such company to be issued to her as full paid up stock, she would sell and assign said letters patent and would transfer 100 shares of such stock to John W. Krueger and 150 shares to Joseph Sachs and 100 shares to promoters of such company to be designated by Krueger and Sachs; that on the same day said Sachs and Krueger and Joseph Kayser, the inventor, made an agreement in writing wherein it was recited that the "Western 'Coated Paper and Card Company, with principal offices at 'Chicago, was about to be incorporated under the laws of Illinois, with a capital of $100,000, for the purpose of manufacturing and selling lithographic, chromo and other coated paper, and that Sachs and Krueger were to be two of the origiinal incorporators, and they desired to secure the services of .Joseph Kayser, and the said Kayser did agree to serve said ¡Sachs and Krueger or their assigns in such business and to ;act as manager and superintendent of the factory' of said •contemplated company when the company was incorporated and $100,000 of stock subscribed and fully paid, at a salary of $4,000 per annum, payable in weekly installments, and also procure the services of his son, Alfred C. Kayser, as assistant superintendent at a salary of $2,000 per annum, covenanting that said Kayser and his son were fully acquainted with the process of manufacturing coated paper, the employment to continue for five years, with a covenant that Sachs and Kayser might assign said contract to the contemplated company.

Through the efforts of Sachs and Krueger the defendant corporation was formed in April, 1891, with a capital stock of $100,000, divided into 1,000 shares of $100 each. At first the directors consisted of seven persons, viz., Krueger, Sachs, the defendants, Schmidt' and Marquis, and Pagenstecher, James White and H. J. Smith. The following year the number of directors was reduced to five, White and Smith retiring. On the 13th of April, 1891, the defendant Leo Schmidt was elected president, Krueger, secretary, and Pagenstecher, treasurer, of the company. At that meeting by-laws were adopted, article VIII reading: “Salaries of all officers and employees of the company shall be fixed by the board of directors.” On May 19, 1892, the defendant Schmidt was re-elected president, and A. N. Marquis elected vice-president, Pagenstecher, treasurer, and John W. Krueger, secretary.

At the directors’ meeting of July 8, 1891, the following communication was read to the board: '

“To the Western Coated Taper & Card Gompany.
Gentlemen : I am the owner of the letters patent of the United States of America for a new and useful improvement in the apparatus for coated paper, which letters patent are number 445955, dated February 23, 1891, which I agree to assign and transfer to you in consideration of your issuing to me $50,000 worth of the capital stock of your company, said shares of stock being one-half of the entire capital, full-paid and non-assessable. In addition thereto I agree, with my husband, Joseph Kayser, and my son, A. C. Kayser, to "deposit for your sole use with any reliable trust company, certain receipts or formulas used in coated paper.
Yours truly,
Johanna Kayser.

The corporation record shows the following action taken upon said proposition: “Resolved, that we accept the proposition of Mrs.1 Johanna Kayser, in which she is joined by Joseph Kayser and A. C. Kayser, and the president and secretary of our company are hereby authorized and directed to issue to the said Johanna Kayser on her order said $50,000 worth of stock of this Western Coated Paper & Card Company. Thereupon these receipts or formulas for using coated paper were sealed in presence of directors by Joseph and A. C. Kayser and placed with the Illinois Trust & Savings Bank with the following remarks on the sealed envelope: ‘ The • within documents are deposited with the Illinois Trust Company by Joseph Kayser and A. C. Kayser and Western Coated Paper & Card Company. ’ ”

Mrs. Kayser had theretofore subscribed for 500 shares of stock.

At this time Leo Schmidt was a director and president of the company, and had subscribed for $10,000 of this stock and had also paid for $10,000 of stock issued to Pagenstecher, who was his brother-in-law. An assignment of the contract of service with Joseph Kayser was made to the company by Krueger and Sachs and accepted by the company in writing, Leo Schmidt executing the acceptance as president in behalf of the company, and stock certificate No. 1 of the company for 500 shares was thereupon issued to Mrs. Johanna Kayser, dated July 1, 1891. That certificate was afterward surrendered and canceled and in its place fifty shares were issued to A. C. Kayser, 135 shares to Joseph Sachs, eighty shares to John W. Krueger, fifty-four shares to Leo Schmidt, thirty-five shares to John E. Wright, thirty-five shares to John White, thirteen shares to Fred C. Laird and thirteen shares to W. H. Lee. The fifty-four shares issued to Leo Schmidt were in the nature of a bonus ■ for his having interested himself in subscribing to the stock of the company for himself and Pagenstecher 200 shares, and this understanding was had prior to the making of such subscription and prior to his election as a director and president of the company, and this subscription for two hundred shares of stock made the stock fully subscribed for.

One H. J. Smith failed to make good his subscription of $5,000, and Leo Schmidt took $2,000 of this stock and a Mr. Hutchinson the remaining $3,000. Schmidt paid altogether $22,000 to the company for his own, Pagenstecher’s and $2,000 of the Smith stock subscription. Of the shares of stock issued to Johanna Kayser, Leo Schmidt acquired from'-White, Wright, Laird, Lee and Krueger 126 shares, for which he paid from $80 to $100 per share.

The president and vice-president to January 9, 1893, had served without salary. On that day at the meeting of the board of directors the following resolution was passed: “Resolved, that the president of the Western Coated Paper & Card Company receive a salary of $5,000 per annum, and the vice-president a salary of $500 per annum, and the treasurer an additional $1,000.” There were present at this meeting Schmidt, Marquis, Pagenstecher, Krueger and Kayser. The evidence shows that Krueger and Kayser refused to vote on this resolution. Krueger, the secretary, testified -that as such he wrote up the record of the meeting and that the resolution as originally recorded by him was: “To compensate them for their capital invested, being ten per cent of their investment,” and the record book shows an obliteration where this recitation appears; that originally, at the request of President Schmidt, he, Krueger, drew a pencil line though those words and that said resolution so appeared at the time he left the company, June 1, 1896. The resolution was carried by the votes of Marquis and Pagenstecher, Schmidt being in the chair as president, Krueger and Kayser refraining from voting.

Opinion.

The theory of complainant’s bill as to over-valuation of the Kayser patent and secret process, in order tó be maintained, must be infected with the “virus of fraud,” and the question for determination is whether such allegation of fraud is sustained by the evidence.

At the time Krueger and Sachs undertook to exploit this patented and secret process for coating paper on both sides with a single passage through a coating machine, no mill manufacturing this kind of paper had been established west of New York and the New England states, and no one but Joseph Kayser and his son Alfred were available to superintend its manufacture and operate a mill of that character, and the west was a promising field for the establishment and operation of such a mill.

Neither the patent, secret process, nor the services of the Kaysers combined, had any market or ascertainable value, and unless the process could be made available by the manufacture of coated paper in accordance with the patent and formula, they were certainly valueless. This condition must not be lost sight of; and to make this process of any value it needed to be developed by being put into practical operation; in other words, it was necessary to have constructed a mill with all necessary machinery and appliances to manufacture this coated paper. A common and ordinary way of bringing this about is through the organization of a corporation. To do so needs the time and services of some one or more persons capable of so doing and of interesting capital in the project. Without this latter the patent, formulas and ability of the Kaysers would be of no value. It was therefore necessary for the Kaysers to interest such men as Krueger and Sachs in the affair. Such being the condition the contracts of February 9, 1891, resulted. Sachs and Krueger as promoters were necessary to make available the ingenuity of Joseph Kayser, and to put into operation the invention and discovery in relation to “coated paper” which he possessed. Enterprises of this character in the industrial world are brought forth, by the method which the Kaysers adopted, and through which the Western Coated Paper &. Card Company was brought forth as a Chicago industry.

Did Schmidt and Sachs, Krueger and the Kaysérs, honestly and in the exercise of reasonable judgment and in a modestly sanguine hope for the future, believe that the patent, formula and secret process and the services of the Kaysers for five years under that contract were worth $50,000? Did they honestly, from the information which they possessed, in the exercise of a reasonable discretion, from the way matters and things appeared to them at that time, believe the project was feasible, and that the processes and the ability of the Kaysers to manufacture coated paper thereunder were reasonably worth $50,000, and resting in that belief was this undertaking finally consummated in the manner shown by the proof? Or, did these parties with an intent to overreach and obtain credit where credit ought not to have been given, fraudulently put a valuation upon these properties at the sum of $50,000? Neither the actions of any of the parties directly or remotely interested, or the outcome of the venture prior to 1896, warrant any such conclusion. Because Johanna Kayser finally received but $10,000 or $15,000 of this stock is no evidence of over-valuation, and what she did with the balance of her stock in distributing it among the promoters who had been instrumental in bringing about the sale neither proves nor tends to prove the allegation of fraudulent overvaluation.

Taylor v. Walker, 117 Fed. Rep. 737, and cases.there cited, are conclusive of this question, and are extreme cases on this point, and they find their support in the absence of proof of fraud. That there was an over-valuation gross and extreme in the Walker Case is admitted, and the manner of its occurrence is chargeable to Walker. The disastrous result which flowed from the gross over-valuation was none the less because the element of fraud did not enter into the over-valuation, but the parties were exculpated from the liability which would have ensued if the over valuation had been tainted with fraud. Coit v. Gold Amal. Co., 119 U. S. 343.

And so in the case at bar,- there is no evidence which points to fraud as a proven fact. At the most it is presumed by complainants from the fact that the promoters received for their services a part of Mrs. Kayser’s stock. The undisputed fact that Leo Schmidt acquired 126 shares of the Kayser stock issued to others and that he paid therefor from 80 to 100 per cent of its face value, inhibits any assumption that Schmidt did not honestly believe that the corporation had received a quid pro quo for the $50,000 of stock issued to Mrs. Kayser. The strongest evidence of a person’s belief in value is not what he is willing to advise another to pay, but that which he will himself' pay, and Sohmidt comes up in the fullest measure to this test.

Fraud is never presumed, but must be proved. Dexter v. McAfee, 163 Ill. 508; Spring Valley Coal Co. v. The People, 157 Ill. 543; Swift v. Yanaway, 153 Ill. 197, 203. I am unable to find from the proven facts that there was a fraudulent overvaluation of the property for which the $50,000 stock was issued to Mrs. Kayser, and I do find, as a matter of fact, that the Kayser stock was in fact paid for in money’s worth, and that there is not any financial liability resting on the Kayser stock. Coffin v. Ransdell, 110 Ind. 417; Drummond’s Case (In re China and Labuan Coal Company), L. R. 4, Ch. Ap. 772.

In Drummond’s Case, supra, the court said: “If a man contracts to take shares he must pay for them, to use a homely phrase, ‘in meal or in malt,’ he must either pay in money or in money’s worth. If he pays in one or the other that will be a satisfaction.”

But to my mind another principle of law is applicable to this case and the relation of Leo Schmidt to it. It is true itiat at the time Schmidt ■ and Pagenstecher subscribed for 200 shares of stock and Schmidt took by assignment twenty shares of the fifty shares subscribed for by H. J. Smith, Schmidt had made an agreement with Krueger and Sachs by which he was to receive fifty-four shares of the stock issued to Mrs. Kayser under her agreement with them, but such agreement at that time was but tentative; it needed for its consummation the action of the directors of the corporation of the Western Coated Paper & Card Company. No directors had to that time been elected, and had Schmidt not been elected a director, but had he simply been a stockholder, he would have been free to have accepted of the fifty-four shares without being accountable to the company therefor, as he then owed it no duty; but afterward, and on April 13, 1891, he was by the stockholders elected a director of the company, and on the same day at a director’s meeting, elected president, and on July 8, 1891, at a meeting of the board of directors at which Schmidt, being president, presided, the proposition of Mrs. Kayser, her husband, Joseph Kayser, and son Alfred, was submitted and accepted, and in pursuance of that action at that meeting the 500 shares of stock were issued to Mrs. Kayser. It is too elementary a principle to need citation of authority that no trustee can profit from his trust. It was Schmidt’s duty as such director and president to make as good a bargain as possible with the Kaysers, and this fifty-four shares of stock so received by Schmidt must inure to the benefit of the corporation and he treated as unpaid stock, and as having been received for the benefit of the corporation, and he held to be indebted to the corporation for its face value at the time when he received it, and he must be held to be a debtor to the corporation in the sum of $5,400 on July 8, 1891, and liable for interest thereon until the time of payment at the rate of five per cent per annum. Hoffman v. Reichert, 31 Ill. App. 558; Same v. Same, 147 Ill. 274.

The appellate court in deciding this case said (p. 562) : "Hoffman, at the time he claims he took possession of the leasehold interest, was both a director of the company and its treasurer. As such he could not deal with the property of the company except as such officer * * * such possession was in law the possession of the corporation. While a director of a corporation is not a technical trustee, still his relation to the corporate property is, in its very nature, a fiduciary relation, and as such director he can not deal with the corporate property for his own benefit, or use it for his individual purpose. * * * The possession of a trustee is presumed to be the possession of the cestui que trust.”

The supreme court in deciding this ease on a further appeal from the appellate court said (p. 279) : "If Hoffman, before taking possession of the property, had resigned as director and treasurer, and notified the company that he would no longer act for it, a different question would be presented. But such was not the case. In speaking in regard to the duties of directors of a corporation, Morawetz on Private Corporations (vol. 1, sec. 511), says: "The directors or trustees of a corporation, in accepting their appointment to office, impliedly undertake to give the company the benefit of their best care - and judgment, and to use the powers conferred upon them solely in the interest of the corporation. They have,no right, under any circumstances, to use their official positions for their own benefit or the benefit of any one except the corporation itself. It is for this reason that the directors have no authority to represent the corporation in any transaction in which they are personally interested, in obtaining an advantage at the expense of the company. The corporation would not have the benefit of their disinterested judgment under these circumstances, as self-interest would prompt them to prefer their own advantage to that of the company. ’ ”

By parity of reasoning the fifty-four shares of stock which Schmidt obtained of the Kayser stock was the property of the corporation of which he was a director and president, and he having converted it to his own use is liable- for its value at the time of such conversion; in other words, it being the property of the company- at that time, it was his duty to pay for it if he desired to retain it, and not having done so, he must do now what he should have done then. Hoyle v. Plattsburgh & Montreal Railroad Co., 54 N. Y. 314.

In Gilman, Clinton & Springfield Railroad Co. v. Kelly, 77 Ill. 426, it is held illegal for directors of a railway company to become members of a construction company with whom they have made a contract to build and equip the road, so as to share in the profits, and if they do, they wall in equity be compelled to account for the profits realized. In this case the directors were held as trustees for the stockholders and it was held a breach of duty to transfer the trust or to assume obligations inconsistent with that relation, or to place themselves in opposition to the interests of the stockholders. On page 435 the court said: “The law has absolutely inhibited the agent or trustee from placing himself in a position where his own private interests would naturally tend to make him neglectful of his obligations to his principal, or where his position would afford him an opportunity to speculate in the trust property. Accordingly, it is f not indispensable there should be actual injury before the 'act of the trustee would be declared void, as being interdicted by the policy of the law. ’ ’

The by-laws of the corporation authorized the payment of" salaries to the officers of the corporation and provided that such salaries should be fixed by the directors. No provision was made for the payment of any salary to the president or vice-president until the meeting of directors on January 9, 1893. At this time the directors consisted of five persons,, who were all present at the meeting. The corporation record does not recite who voted for or against the resolution. The-record being silent on this question, evidence aliunde was introduced to prove this fact, and the evidence establishes the fact that Krueger and Kayser did not vote, and the resolution was therefore carried by the votes of Marquis and Pagenstecher on the theory that Schmidt did not vote, and that three were a quorum, and that the votes of Marquis and Pagenstecher were a majority of that quorum; but however that may be, it is immaterial to the- solution of this salary question. The motive for voting a salary to the president and vice-president was originally stated upon the records to' be: “To compensate them for their capital invested, being ten per cent on their investment.” This part of the record was obliterated and stricken from the record by the secretary after the reading of the minutes at the request of President Schmidt at the next meeting of the board of directors. If this be true, then the purpose of this resolution was not fi> pay for the services of the president and vice-president, but to give them an income upon their investments in the company, which theretofore had not paid any • dividends. The treasurer’s salary was increased by the same resolution as that in which the salary was voted to the president and vice-president; therefore, the votes of Marquis, the vice-president, and Pagensteeher, the treasurer, were necessary — Krueger and Kayser not voting — to carry the resolution, and the evidence clearly demonstrates that the salary resolution was passed at the instance and by the influence of Schmidt, the? president. This action by the directors was illegal under the comparatively recent cases of McNulta v. Corn Belt Bank, 164 Ill. 427, and Adams v. Burke, 201 Ill. 395. The McNulta Case is squarely in point, and Adams v. Burke is equally so, and the legal principle deducible therefrom is that a salary-voted an officer of a corporation, by his procurement, or where his vote is necessary to pass the resolution, is illegal and void; and the infirmity in this resolution making it void is the fact that all of the parties voting for the resolution were interested in the salaries voted by it, and all the cases are uniformly to the same effect.

It therefore follows that the sums received by Schmidt and Marquis under this salary resolution were without warrant of law and illegal, and must be refunded. It is a demand due to the 'corporation which may be recovered by a receiver to be appointed in a proceeding of this character.

The pleadings may be amended to conform to the proof and to the.findings, or if complainants shall elect not to amend, a decree may be drawn in conformity with this opinion, holding the defendants Schmidt and Marquis liable to account for the amount of money received by them, respectively, under the salary resolution of January 9, 1893, otherwise a decree may be drafted covering the stock and salary issues here decided.

NOTE.

1. An appeal was prayed and allowed in the above case, to the appellate court but such appeal was never prosecuted.

2. As to whether stock issued in exchange for patent rights, and as to whether stock issued as a “bonus,” is full paid, see Buda Foundry & Mfg. Co. v. Columbian Celebration Co., 1 Ill. C. C. 398, aff; 230 Ill. 373.

• 3. Directors or officers cannot vote salaries to themselves where their vote is necessary to pass the resolution. Where directors vote salaries to themselves as officers, such action is voidable where the vote of any of the interested parties or the votes of parties under their control is necessary to pass' the resolution. McNulta v. Corn, etc. Bank, 164 Ill. 427, 448; Adams v. Burke, 102 Ill. App. 148, affirmed 201 Ill. 395; Mallory v. Mallory, 61 Conn. 131, 23 Atl. 703; 10 Cyc. 899, and cases cited; Cook on Corporations, § 657, p. 1507. And where concert of action is shown it is immaterial that the salary of each was fixed by a vote which of and by itself would have been proper if the vote of any of the parties interested in the scheme was necessary on each particular ballot. Mallory v. Mallory, 61 Conn. 131. But see, McNab v. McNab, 16 N. Y. S. 448 (criticized 10 Cyc. 899) and explained in Kearns v. West Point, .42 N. Y. S. 773. Where a salary has been illegally declared, a court of equity will convert it into a fund at the suit of an injured stockholder, giving him his share as dividends where circumstances warrant. Brown v. De Young, 167 Ill. 549; Adams v. Burke, 102 Ill. App. 148, aff. 201 Ill. 395. “Where directors vote large pay to themselves, evidently in bad faith and with a view to depriving the corporation of more than a reasonable proportion of its net earnings a dissenting stockholder may file a bill in equity to have the amount recovered hack.” Cook on Corporations, § 657. Cited with approval in Bixler v. Summerfield, 195 Ill. 147.

Combination of stockholders to divert property of corporation to pay themselves large salaries can be attacked in equity. Sellers v. Phoenix Co., 13 Fed. 20; Bixler v. Summerfield, supra. Equity has jurisdiction to determine whether or not the salary paid an officer is reasonable or not and to compel the repayment of the surplus. Davis v. Davis, 52 Atl. 717 (N. J. Eq.); Lillard v. Oil Co., 56 Atl. 254 (N. J. Eq.); Mitchell v. United Boxboard Co., 66 Atl. 938 (N. J. Eq.). Especially where voted by one holding majority of stock. Dillard v. Oil Co., supra. A salary which takes all the profits and part of the capital stock is unreasonable. Cook on Corporations, § 657, p. 1507 — Ed.


author: Blanchard, J.:—

text:
      (Circuit Court of La Salle County.)

    The People, etc. vs. Frederick W. Mathiessen.
    (1896.)
    1. Cities and Villages — Duty of Mayor to Enforce State ‘ Laws. Section 10 of article 2 of the city and village act of 1872 which provides that the mayor “shall take care that the laws and ordinances are faithfully executed” has reference only to city ordinances and not to state laws.
    2. Same “Take Care” Defined. The provision of the city and village act that the mayor shall “take care” that the laws and ordinances are faithfully executed mean that the mayor shall be faithful and vigilant to carry such laws into effect.
    3. Sunday Closing Law — Duty of Mayor to Enforce. It is not the duty of a mayor of a city organized under the city and village act of 1872 to enforce the law of the state which prohibits the keeping open of tippling houses on Sunday.

      4. Palpable Omission of Duty by Mayor — What Constitutes. The palpable omission of duty referred to in section 14 of article 2 of the city and village act of 1872 which provides for the indictment of the mayor and others who shall be found guilty of a palpable omission of duty, etc., has reference to some duty imposed by the act of incorporation, or the city ordinances, or to some duty definitely described by the laws of the state.
    •5. Sunday Closing Law — Remedy to Enforce — Duties of Mayor. Any person may secure the prosecution of a violator of the Sunday closing law. The duty of prosecuting offenders is placed upon the states attorney. It is not the duty of the mayor of a city to personally detect offenders and enter complaint before a magistrate or grand jury.
    16. Same — Pleading — Indictment — Meaning of Allegation that Defendant Wilfully Permitted Opening of Tippling House. An allegation that defendant wilfully, etc., permitted the keeping open of a tippling house on Sunday cannot be accepted for more than that he suffered such house to keep open or did not interfere to prevent A mayor has no power or authority to grant a permit or a license to keep open a tippling house on Sunday.
    7. Same — Duties of Mayor to Adopt Precautionary Measures to Prevent Keeping Open of Tippling House on Sunday. The mayor of a city is not required by any law to adopt precautionary measures to guard against the possibility or probability of a tippling house keeping open on Sunday.
    .8. Criminal Code — Section 260 — Malfeasance in Office — Duties of Municipal Officers Under. Section 260 of the criminal code which has relation to malfeasance in office, etc., of per: sons holding public office, imposes no duties on municipal officers. Their duties are prescribed by the city and village act.
    Motion to quash indictment. The facts are stated in the ■opinion.
   Blanchard, J.:—

This is an indictment presented against Frederick W. Mathiessen as mayor of the city of La Salle, presumably, under section 14 of art. 2 of an act entitled “An act to provide for the incorporation of cities and villages, ’ ’ wherein it is ■provided, “In case the mayor or any other municipal officer ■shall at any time be guilty of a palpable omission of duty, he shall be liable to indictment and fine. * * *”

The motion to quash the indictment presents for adjudication an issue of law, namely, according to the pleading and facts therein stated, was the defendant guilty of a palpable omission of duty in his office of mayor of the city of La Salle?

Each count of the indictment (six in all) alleges, that it was the duty of the said Frederick W. Mathiessen, as mayor of the city of La Salle, to take care that the laws of the state of Illinois in the said city of La Salle were faithfully executed. This allegation is not one of fact but is simply the conclusion of the pleader and is equivalent to an allegation, that it was the duty of Frederick W. Mathiessen as mayor of the city of La Salle to take care that the law of the state of Illinois, which provides, “whoever keeps open any tippling house, or place where liquor is sold or given away, upon the first day of the week, commonly called Sunday, shall be fined not exceeding $200,” was faithfully executed in the said city of La Salle; for the breach of the alleged duty relates specifically to said law. In the first count it is alleged that certain persons named, some forty or more, “are the keepers of tippling houses or places where liquor is sold in the said city of La Salle.” In the second count it is alleged, “one Palmyra Pierard was the keeper and owner of a certain tippling house or place where liquor is sold at and within the said city of. La Salle.” A similar allegation is contained in each of the other counts, and each of said counts contains an allegation in substance, that “said Frederick W. Mathiessen, mayor of the said city of La Salle as aforesaid, not regarding the duty of his office, unlawfully, wilfully, knowingly and contemptuously permitted the said-to keep open their or his tippling house or place where liquor is sold in said city of La Salle on the-day of-, being the first day of the week, commonly called Sunday.”

In logical order, the first question presented for our consideration- on the motion to quash the indictment and each count thereof, is the alleged duty of the mayor “to take care” that the law of the state of Illinois prohibitory of open tippling houses on Sunday/ in the city of La Salle, is faithfully executed. Is such a duty specially imposed by law upon the mayors of cities? From what source shall we ascertain the duties of mayors as such? Manifestly, in the first instance, from the charter creating the municipality.

Referring to the charter, the first article thereof relates to the procedure by which cities and villages may' be incorporated. Article two thereof creates the office of mayor and prescribes his powers and duties, and special provision is made for the imposition of penalties for misconduct, etc. Section 1 of said article provides that the chief executive officer of a city shall be a mayor. Sections 2 and 3 relate'to vacancies in said office; section 4 relates to mayors, pro tem.; section 5 to vacancies by removal. Section 6 provides: 1 ‘ The mayor shall preside at all meetings of the city council, hut shall not vote except in case of a tie, when he shall give the casting vote.” Section 7 clothes the mayor with power to remove any officer appointed by him under certain limitations. Section 8 grants to the mayor thp same powers within .the city limits conferred upon sheriffs to suppress disorder and keep the peace. Section 9 relates to power to release persons imprisoned for violation of any city ordinance. Section 10. “He shall perform all such duties as are or may be prescribed by law or by the city ordinances, and shall take care that the laws and ordinances are faithfully' executed. ’ ’ Section 11 confers power to examine records, etc. Section 12 relates to his annual message to the council. Section 13 confers the power to call on male inhabitants to aid in enforcing the laws and ordinances and to call out the militia to aid in suppressing riots and other disorderly conduct, etc. Section 14 provides, “In case the mayor or any other municipal officer shall, at any time, be guilty of a palpable omission of duty, or shall wilfully and corruptly be guilty of oppression, malconduct or misfeasance in the discharge of the duties of his office, he shall be liable to indictment,” etc. Section 15 empowers the mayor to appoint competent persons to revise the ordinances.

It may be assumed that five of the sections of article 2 impose imperative duties on the mayor, and in considering the scope and nature of said duties, we must keep in mind that the mayor is the chief executive officer of the municipality, an office created for municipal purposes only. His duties are purely executive and administrative. He possesses no judicial or legislative functions or powers. Said section 6 requires the mayor to preside at all meetings of the city council but he cannot vote upon any law or ordinance or other question except in case of a tie, when he shall give the casting vote. If the mayor should persist in refusing to so preside he would be guilty of a palpable omission of duty. Section 8 requires the mayor to exercise the power conferred on sheriffs to suppress disorder and keep the peace within the city limits. What are the powers conferred on sheriffs in that regard?

Section 17 of the law in relation to sheriffs provides: 1 ‘ Such sheriffs may arrest offenders on view and cause them to be brought before proper magistrates for trial or examination.” Then to suppress disorder and keep the peace the mayor may arrest offenders on view and take them before proper magistrates “for trial or examination.”

Section 10 of article 2 aforesaid, provides: “He (the mayor) shall perform all such duties as are or may be prescribed by law or by the city ordinances, and shall take care that the laws and ordinances are faithfully executed.” It will be observed that this section provides, 1st, He (the mayor) shall perform all duties as are or may be prescribed by law or by the city ordinances; 2d, and shall take care that the laws and ordinances are faithfully executed. Among the duties prescribed by law may be placed the duty to preside at all meetings of the city council; to annually and from time ot time give the counsel information relative to the affairs of the city, etc., to approve or disapprove all ordinances passed by the city council, and sign such as he approves and state his objections in writing to such as he disapproves. And (3rd) “he shall take care that the laws and ordinances! are faithfully executed.” Waiving for the present the question whether the laws referred to are state law or city laws, it becomes important, and necessary to inquire as to what is comprehended in its broadest legal sense in the phrase, “.take care that the laws and ordinances are faithfully executed. ’ ’ Section 3, of article 3, of the constitution of the United States, provides, among other things “he (the president) shall take care that the laws he faithfully executed.” Section 7, of article 3, of the Illinois constitution of 1818, provides, among other things, that the “governor” “shall take care that the laws be faithfully executed.” The same provision is contained in the constitutions of 1848 and 1870, and we assume it will be found in all organic acts. Yet we have been unable to find any judicial elucidation of the phrase. If we attempt to analyze the phrase, we find that the word, “take,” according to Webster, means in a general sense, to get hold or gain possession of, either passively or by active exertion. The word “care” means “to be anxious or solicitous: to be concerned about; (2) to be inclined or disposed; to have regard to.” The words, “to take care,” mean, according to Webster, “to be careful,” “to be solicitous for.” (3) “To be cautious or vigilant.” “Faithfully executed,” we think, means, that the laws and ordinances should be fairly and honestly carried into effect. The legal import of the phrase as we comprehend it, is that the mayor shall be solicitous and vigilant to carry into effect the laws and ordinances, or shall be careful and vigilant to carry into effect, etc.

Section 14, of said article 2, provides: “In case the mayor or any other municipal officer shall, at any time, be guilty of a palpable omission of duty, or shall wilfully and corruptly be guilty of oppression,, malconduet or misfeasance in the discharge of the duties of his office, he shall be liable to indictment in any court of competent jurisdiction,” etc. Obviously, said article 2 forms a complete code, civil and criminal so far as the mayor is concerned. Thereby, the office of mayor is created, his qualifications are fixed, provisions made for filling vacancies — -and for a mayor pro tem. His duties and powers are definitely prescribed, and for palpable omission of duty, or misconduct in office, criminal procedure and penalties provided.

Hence, we are driven to the conclusion that section 10 of article 2, has not reference to the general laws of the state, civil or criminal, but has reference only to the laws or provisions of law found within the various articles composing the charter of the municipality, or in other words, the act entitled, “An act to provide for the incorporation of cities and villages,” which' is a law by virtue of which the city of La Salle was organized. That law created the office of mayor and prescribed his general duties and powers. Such duties and powers are required and conferred by law, and are the laws referred to by said section 10 of article 2. This is manifest, when we consider the object and purpose of the law heretofore referred to providing for the incorporation of cities, etc., and it is still more manifest when we consider the sections of article 3, preceding section 10, wherein are defined the qualifications, duties and powers of mayors followed by section 10, “he shall perform all such duties as are or may be prescribed by law or by the city ordinances, and shall take care that the laws and ordinances are faithfully executed. If we have concluded correctly, it follows that this indictment cannot be maintained under section 14 of article 2 aforesaid, because the breach of duty charged is in permitting a tippling house to keep open on Sunday. No such provision can be found in the city incorporation act; no city, law or ordinance is referred to in the indictment.

We have considered the alleged duty, which was to “take care that the laws of the state of Illinois in the said city of La Salle were faithfully executed.” We have noticed the alleged violation of law, namely, that certain persons named were keepers of tippling houses in the city of La Salle, and kept open on Sunday; “that said Frederick W. Mathiessen unlawfully, willfully, knowingly and contemptuously permitted said * * * to keep open their or his tippling house on Sunday.” The indictment describes no offense within the purview of section 14, of article 2. The palpable omission of duty therein referred to has reference to some duty imposed by the act of incorporation or the city ordinances, or to some duty definitely prescribed by the laws of the state of Illinois.

“By what procedure shall the mayor take care that the laws of the state of Illinois against keeping open a tippling house on Sunday are faithfully executed in the city of La Salle ? It will not be contended that it is his duty to personally visit the saloons on Sunday and with a strong hand close and bar the doors. If the law is violated any citizen is authorized to make complaint before a proper magistrate and have the offender tried, or make complaint to a grand jury where an investigation can be had and the offender indicted, and, on conviction, fined not exceednig $200 for each offense. A prosecution of the offender in the manner indicated is the only way provided by law for dealing with the offender. Any person may start the machinery of the law, and the law has designated an officer called the state’s attorney, and enjoined upon him the imperative duty of prosecuting indicted offenders, and, I am prepared to say of the present state’s attorney that he is willing and able to discharge his duty, and that he has heretofore and quite recently been diligent in that regard. The law has not specially imposed upon the mayor as an official the duty to personally detect offenders and enter complaint before a magistrate or grand jury. The public, of course, expect that his influence as a private citizen, and in his official capacity will be exerted in favor of law and order.

There is no intimation that the defendant in any manner, interfered, or attempted to interfere to protect offenders from prosecutions. There is no intimation that he in any manner aided, abetted or encouraged the proprietors of tippling houses to keep open on Sunday. True, it is alleged substantially that the defendant, regardless of his duty as mayor> “unlawfully, knowingly, willfully and contemptuously permitted the said * * * to keep open his tippling house on Sunday. ’ ’ A mayor has not power or authority to grant a permit or a privilege on a license to keep open a tippling house on Sunday. Therefore, the allegation that he permitted, etc., can not be accepted in the sense that he issued a permit, or license or- privilege,' etc. .The construction must be most strongly against the pleader. The allegation can be accepted for no more in a legal sense than that he suffered * * * to keep open his tippling house on Sunday, or that * * * kept open his tippling house on Sunday, and the mayor did not interfere to prevent, therefore, he was guilty of a palpable omission of duty. Suppose on trial on the indictment proof was made that Frederick W. Mathiessen was mayor of the city of La Salle; that A. B. kept a tippling house in the city of La Salle; that he kept his tippling house open on Sunday and that the mayor knew he so kept open, would such proof convict the mayor of a palpable omission of duty? We think not. The mayor, nor any other citizen, could commence any proceeding against the keeper of a tippling house under the law in question until the overt act of keeping open was committed, thereafter the offender- could be prosecuted. Ordinarily, legal proceedings can not be instituted against a man to prevent him from committing a crime. No duty required of the mayor by the city ordinances is involved in this indictment. , The mayor is not required by any law or ordinance to adopt precautionary measures to guard against the possibility or probability of a tippling house keeper, keeping open on Sunday. The writer appreciates the gravity of the-offense this indictment seeks to abate, but the defendant is not indicted for the crime of keeping open a tippling house on Sunday. He is indicted for a palpable omission of duty as mayor, in that he did not prevent other persons from keeping open a tippling house on Sunday. There is no matter of fact alleged or set forth in the indictment from which a palpable omission of official duty by the mayor can be evolved. The fault lies, not with the state’s attorney, but in the insufficiency of the facts as'they exist.

Section 260 of the criminal code (Starr & Curtis) was referred to in the argument. That section provides: “Every person holding any public office (whether state, county or municipal), trust or ‘employment who shall be guilty of any palpable omission of duty * * or who shall be guilty of willful and corrupt oppression, malfeasance or partiality, where no special provision shall have been made for the punishment thereof, shall be fined not exceeding $10,000 and may be removed from his office, trust or employment.” This section imposes no duties on mayors or other municipal officers. Then we must look elsewhere for a law prescribing his duties and they will be found in the “Act of Incorporation,” which we have considered.

The motion to quash will be sustained.

NOTE.

The above decision was cited in the briefs of counsel in People ex rel v. Busse, Mayor, etc., now pending in the appellate court of Illinois, first district. — Ed. '