author: Mr. Justice Baker

text:
    The People ex rel. James S. Pollard et al. v. Charles P. Swigert, Auditor.

      Filed at Springfield

      October 31, 1889.

    1. Drainage law—drainage bonds—powers of commissioners. The only powers that are expressly granted to drainage commissioners in respect to sub-districts that are at their option formed, are to make the division, and then to classify the lands therein, and make assessments as in original districts; and the statute provides that the fmids arising therefrom shall be kept as a separate and distinct fund, to be used in the sub-district from which collected. From these powers there would be no implied authority vested in the commissioners to issue bonds for an assessment made by them upon lands and property in the sub-districts.
    2. lío power is anywhere in the statute, either expressly or by implication, vested in the commissioners of either township or union districts to issue bonds or notes for unpaid assessments or installments thereof, for districts or sub-districts, or to issue any notes or bonds whatever, for any purpose or under any circumstances.
    3. Special districts alone are authorized to issue bonds for unpaid assessments or installments thereof, and they can not issue the bonds of the district for the indebtedness of a sub-district. Such sub-districts are not independent bodies, corporate and politic, but are dependent upon the original organization, and the corporate authorities for the main district act for the sub-districts.
    é. While the commissioners of a special district have power, under the statute, to form sub-districts, they have no lawful authority to issue bonds for an unpaid assessment made in one of such sub-districts, or for any part thereof; and even if they had the power to issue the bonds of the sub-district, bonds of the original or main district would be void, and not entitled to registry in the Auditor’s office.
    This is an original suit in this court, wherein James S. Pollard and Milton A. Goff, partners, under the firm name of Pollard & Goff, filed a petition for a writ of mandamus to compel the Auditor of Public Accounts to register certain bonds. The Auditor answered the petition, and the questions involved in the case arise upon a demurrer to his answer. The facts of the case appear in the petition and answer, and, so far as they are material to a consideration of the questions that arise in this controversy, may be briefly stated.
    The “Lake Fork Special Drainage District, in the counties of Piatt, Champaign and Douglas, and State of Illinois, ” was duly organized in 1882, under the Drainage act, approved May 29,1879, and in force July 1,1879, and the several acts amend-atory thereof. The drainage commissioners of said special drainage district, after the location, construction and completion of a main drain or outlet to carry off the waters of said district, divided the district into thirty-one sub-districts, and numbered them from one to thirty-one, inclusive. A levy and assessment of $2000 was made upon the lands and property benefited in sub-district No. 10, and was collected. Subsequently, in 1887, an additional sum of $14,000 was levied as a special assessment for drainage purposes on the lands and property benefited in sub-district No. 10. Said assessments of' $2000 and $14,000, respectively, were upon the lands and property of said sub-district No. 10 only, and were for the payment of benefits to lands and property in said sub-district No. 10 only, and the improvements to be paid for by said assessments were not benefits to any other lands or property, and were no part of the main drain or general system of drainage for the benefit of the entire Lake Fork Special Drainage District. The commissioners did not, at the time the levy of $14,000 was made, order the tax to be paid in installments, but tax lists for the whole of the assessment of $14,000 were placed in the hands of the treasurer of the district for collection on the first day of July, 1887, and remained in his hands until the 14th day of November, 1887, and during the intervening period of about four and a half months the treasurer collected $8408.18 of said assessment, leaving unpaid thereon the sum of $5591.82. Thereupon, on the 14th day of November, 1887, the drainage commissioners of Lake Fork Special Drainage District, in the counties of Piatt, Champaign and Douglas, and State of Illinois, made an order postponing the payment of said $5591.82, until the first day of September, 1892, and issued bonds for ninety per cent of the unpaid and postponed $5591.82, with interest coupons attached. Four of said bonds were for $1000 each, and the fifth was for $1032.64. The bonds and coupons were alike, except in respect to amounts and dates of maturity. One of said bonds reads as follows:

      “No. 35. $1000.

    United States of America ; County of Piatt ;
    State of Illinois.

      Construction Bond. — Lake Fork Special Drainage District.

    “On the first day of May, 1893, for value received, the Lake Fork Special Drainage District promises to pay to the bearer hereof the sum of $1000, in lawful money of the United States, at the fiscal agency of the Treasurer of the State of Illinois in the city of New York, State of New York, with interest at the rate of seven per cent per annum, from the first day of December, 1887, until paid, as is shown by and upon the surrender of the interest coupons as they severally become due.
    “This bond is one of five bonds issued by said drainage district, four being for the sum of $1000 each, and one being for the sum of $1032.64, all being of like date, bearing like interest, payable at like time and place, and issued on the second assessment of sub-district No. 10 of said Lake Fork Special Drainage District, confirmed on the 25th day of June, 1887, against all the lands within said sub-district No. 10 at the date of such confirmation, the payment of the unpaid portion of said assessment being duly extended until September 1, 1892, and on which assessment there remains unpaid the sum of $5591.82.
    “All said bonds are issued under and by virtue of the 63d section of an act of the General Assembly of the State of Illinois, entitled ‘An act to provide for drainage for agricultural and. sanitary purposes, and to repeal certain acts therein named,’ approved June 27, 1885, in force July 1, 1885, for the payment of which principal sum, and the interest coupons attached, the faith of said Lake Fork Special Drainage District is hereby irrevocably pledged, together with the unpaid assessments above described in sub-district No. 10, becoming due September 1,1892, upon which this bond and coupons attached are based, and are constituted a special lien for the payment thereof.
    “And we, the commissioners of said special drainage district, do hereby certify that all requirements of law have been fully complied with in making said assessment and extending the time of payment thereof, and in making and issuing said bonds.
    “In testimony whereof, etc.
    Lake Fobk Special Dbainage Distbict, etc.
    By Timothy Foohy, [Seal.]
    Signed: P. T. G-allivan, [Seal.]
    Chables B. Moobe. [Seal.], Commissioners of District.”

    To each of said bonds five coupons are attached, one of which reads as follows:

      “No. 35. . $70.00

    “On the first day of May, 1893, the Lake Fork Special Drainage District, in the counties of Piatt, Champaign and Douglas, and State of Illinois, will pay the bearer, at the fiscal agency of the Treasurer of the State of Illinois in the city of New York and State of New York, $70, lawful money of the United States, being one year’s interest on their bond numbered as above.”
    The petitioners presented the bonds in question to the Auditor, for registration, and tendered him the fees allowed by statute, and presented to him a sworn statement made by the commissioners of the drainage district, but registration of the bonds was refused. ■
    Mr. S. R. Reed, and Mr. H. H. Crea, for the relators.
    Mr. George Hunt, Attorney General, for the respondent.
   Mr. Justice Baker

delivered the opinion of the Court:

The Drainage ac't approved June 27,1885, and in force July 1, 1885, is a revision and amendment of the Drainage law of 1879, in force July 1, 1879, and of several other acts therein mentioned, and its provisions govern in respect to all the matters here at issue. Laws of 1885, p. 77, etc.

Section 11 and section 30, and all the intervening sections of the act, relate to the formation, in counties under township organization, of drainage districts composed of lands that are all located in one township, or to what are called combined or township drainage districts, and to the powers and duties of the commissioners and officers of, and the mode of procedure in, such districts. It would seem that section 31, and most, if not all, of the sections that follow, to section 47, inclusive, are general in their character and scope, and are intended to have application to drainage districts organized or operating under the act, irrespective of the question whether they are township, union or special drainage districts. Section 48 relates to union drainage districts, or such as are formed where the lands lie in two towns in the same or different counties, both under township organization; and in respect to such districts it is provided that the clerk and commissioners shall have like powers and duties as provided for such officers in districts wholly in one town. Section 49, and most of the following sections, relate to special drainage districts, or such as are formed where the lands lie in three or more towns in the same or different counties, or in a county not under township organization, or partly in a county under township organization and partly in a county not under township organization.

Section 43 is the only section of the act which purports to treat of sub-districts; and it not only provides for the formation of sub-districts by the owners of land in main districts, for the purpose of local or more minute drainage in the manner provided in the act for the organization of main districts, but also provides that “in drainage districts organized or proposed to be organized, which have one or more lateral drains- or proposed drains, which are independent of each other, except as to the main drain or outlet, and which do now or will drain separate areas within said district, it shall and may be lawful for the commissioners, at their option, to divide the district into as many sub-districts as there are separate areas, for the purpose of making assessments of benefits for the work to be done in said sub-district.”

The contention that the authority thus given to commissioners to make sub-districts is not granted to the commissioners of special drainage districts, for the reason the section granting the power is found in that part of the Drainage law which relates to drainage districts lying wholly in one township, and wherein the commissioners of highways are ex officio drainage commissioners, we do not regard as well grounded. The section is found among those which are general in their character, and applicable alike to township, union and special drainage districts, and from the position of the section in the act, and from its subject matter, there is ground for the conclusion it was intended to be so applicable. But whether this be the correct view or not, is unimportant to the present inquiry. The latter part of section 52 of the act provides, that the commissioners of a special drainage district “shall be the corporate authorities thereof, and shall be a body politic and corporate, with like powers as herein conferred upon other drainage commissioners, either by this act or other laws of this State.” Begardless of what the powers of the commissioners of a special drainage district would be without this latter provision, it is very plain therefrom that the commissioners of the “Lake Fork Special Drainage District, in the counties of Piatt, Cham-paign and Douglas, and State of Illinois, ” had ample authority to form sub-districts.

The purpose for which drainage commissioners are given authority to form sub-districts is declared by the statute to be that of making assessments of benefits for the work to be done in said sub-districts. The only powers that are expressly granted to the commissioners in respect to sub-districts that are at their option formed, are to make the division, and then to classify the lands therein, and make assessments as in original districts; and the statute provides, that “the funds arising therefrom shall be kept as a separate and distinct fund, to be used in the sub-district from which it was collected.” • From these powers there would be no implied authority vested in the commissioners to issue bonds for an assessment, or part of an assessment, made by them upon the lands and property in the sub-district. We have seen that the section is alike applicable to township, union and special districts, and while, by the statute, union districts are given like powers with township districts, and special districts are granted all the powers conferred upon either township or union districts, yet the converse of this is not true, and township and union districts are nowhere invested with all the powers that are granted to special districts. Nor is power anywhere in the act, either expressly or by implication, vested in the commissioners of either township or union districts to issue bonds or notes, either for unpaid assessments or installments thereof, or for any part of any such assessment or installment, either for district or sub-districts, or to issue any notes or bonds whatever, for any purpose' or under any circumstances.

• If, then, the commissioners of Lake Fork Special Drainage District, in the counties of Piatt, Champaign and Douglas, and State of Illinois, had authority to issue bonds • for any portion of the unpaid assessment for benefits made by them in sub-district No. 10, it must necessarily be by virtue of power conferred by some section of the statute that is applicable only, to special drainage districts. The claim made is, that the bonds are authorized by the proviso contained in section 63. That proviso is as follows: “Provided, however, if, in the judgment of the commissioners, the payment of said tax, or any installment or installments thereof, for the speedy completion of the proposed work, would be too heavy a burden upon the owners and persons interested to pay in time to be used for said work, the commissioners may, at any time after the levy has been made, postpone the payment of such tax or of any one or more installment or installments, or any part thereof, to such time or times as they may think proper and advisable, but not longer than fifteen years from the time of the levy thereof. For the construction of the proposed work, or for the continuation and completion of the same where it has been commenced, the commissioners may borrow money, not exceeding in amount ninety per cent of any assessment or levy unpaid at the time of borrowing, and may secure the payment of the same by notes or bonds of said district, bearing interest not to exceed seven per cent per annum. The interest may be made payable annually or semi-annually, which notes or bonds may be made due and payable at the same or different times, but shall not run beyond one year after the last assessment or levy on account of which the money is borrowed falls due, which notes or bonds shall not be held to make the commissioners personally liable for the money borrowed, but shall constitute a lien upon the assessment or assessments, levy or levies, on account of which they are issued, for the repayment of the principal and interest thereon.”

It is evident, upon examination, that the division of the matter contained in sections 62 and 63 into two sections, is purely arbitrary, and that such matter is to be considered as though it were all contained in one and the same section. It also appears from said sections, that the “tax" referred to in the proviso is one arising out of “any levy made as herein provided.” The language of the .statute is somewhat ambiguous, but we think the assessments or levies mentioned in the proviso, and the payment of which, or of any installment or- installments of which, or any part thereof, may be postponed by the commissioners, and money borrowed by them not exceeding in amount ninety per cent of the assessment or levy remaining unpaid, to be secured by the notes or bonds of the district, are the district assessments provided for in section 62 and the additional district levy or levies mentioned in section 63. No provision is made in either section 62 or section 63 for any sub-district assessment; but sub-district assessments are mentioned and provided for only in section 43 of the act, although it is true that it is there enacted that such assessments are to be made in the same manner that assessments are made in original districts.

The provision made in section 63 is for the issuing of the “notes or bonds of said district,” and the presumption must be, that if it' had been the legislative intention that notes or bonds might be executed by or on behalf of a sub-district or for an unpaid sub-district assessment, or a part thereof, such intention would have been clearly indicated. It is expressly stated in section 43, that the sub-district shall not have any claim upon the funds of the main district for its local use, and it would be an anomaly that bonds of the entire original district should be issued for the indebtedness of a sub-district. The sub-districts organized at the option of the commissioners1 of the main district are not independent bodies politic and corporate, but are dependent upon the .original organization, and the corporate authorities of the main district act for the sub-districts; and had it been intended that negotiable paper should be based upon the unpaid assessments of a sub-district, it is but reasonable to suppose the law would have indicated the form and effect of such paper, and the manner in which it should be executed, and would not have directed that the bonds or notes of the “district” should be given therefor, Were the sub-district in a township or union district, no bonds or notes could be issued for unpaid taxes for benefits, and as the provisions found in the act in regard to sub-districts are all contained in section 43, and are alike applicable to all sub-districts organized by commissioners of main districts, whether township, union or special districts, it is to he presumed, in the absence of a clear indication of a legislative intention otherwise, that bonds or notes can not be issued for unpaid assessments of the sub-district, it being formed by the commissioners of a special drainage district.

Various other sections of the statute, which follow this section 63, tend to show that while it was contemplated that bonds or notes would be issued based on district assessments, yet that bonds or notes for sub-district assessments were not in contemplation. Section 64 provides for funding notes or bonds issued for an assessment, and executing new notes or bonds; but while the “district” is mentioned, there is no reference therein to a “sub-district.” Section 65 provides for the issuing of bonds for unpaid assessments upon the petition of a majority of the owners of land in special drainage districts, but it makes no mention of sub-districts. Section 66 makes provision for the keeping of a record by the corporate authorities of the district of all bonds issued, and designates what matters of information shall appear upon the face of such record, but it contains no allusion to sub-districts or sub-district assessments. Section 67 makes it the duty of the Auditor of Public Accounts to register, upon presentation, in a book kept for that purpose, all bonds issued under the provisions of the act, and it specifically points out what such registration shall show. The matters so required to be shown are: The date, amount, number, date of maturity, rate of interest, time when such interest is payable, place of payment of the principal and interest of such bond, under what act issued, by what district issued, and the name of the person or persons presenting the same for registration. If it had been within the legislative contemplation that bonds would be issued under the act by a sub-district, or for or on behalf of a sub-district, it would seem it would have been required the registration in the office of the Auditor should show such sub-district. So, also, under section 68, the Auditor’s certificate sent to the county clerk shows the amount necessary to pay the interest, or interest and principal, “of such particular district,” which is to be levied “within the limits of such district,” and this amount is, by the district clerk, to be apportioned “in such district, ” and a pro rata share extended as a tax against “the lands and property in the district.” There is no suggestion whatever in the section, of a sub-district. In section 70, the references are to “the lands and property in said district,” to the “notes or bonds of the district” and “bonds of the district,” without any mention of sub-district or sub-district bonds. In section 72, the “notes or bonds of the district” are in like manner spoken of, and no mention made of sub-districts or sub-district bonds. It is hardly reasonable to suppose that if it had been contemplated and intended that bonds might be issued by or on behalf of a sub-district, or for a sub-district assessment, there would have been such an entire omission in each and every one of these numerous sections relating to drainage bonds, of any reference whatever to sub-districts or sub-district bonds.

Neither township drainage districts nor union drainage districts are, under the law, given the privilege of issuing bonds for unpaid assessments, or any part thereof, even where such assessments are made for the whole district. The General Assembly saw fit to confine that privilege to special drainage districts. Sub-districts, even when they are formed in a special drainage district that includes lands in three or more counties, may be, and frequently are, very small in area, and include the property of but a few land owners, and it would seem, the policy of the law which would deny the right of issuing negotiable bonds and paper in township and union districts, would also deny such right to all mere sub-districts.

In section 78 is found another reason why the provision in section 63 for the issuing of district bonds for assessments in special drainage districts should not be held to apply to this sub-district No. 10. A sub-district may be formed in a main district, either by the act of the commissioners or “by the owners of land, * * * in the manner provided in the act for the organization of main districts.” If this sub-district had been organized “by the owners of land,” thereby giving it an independent corporate existence, and it embraced within itself lands in three or more townships, it might possibly, although a sub-district, be regarded as something more than a mere sub-district, and as a special district within the purview of the act, since it would have had all the essential attributes of a main special district. But it was not formed by the act of the land owners, has no autonomy of its own, and is not in three towns. Not only is the power to issue bonds a special power granted to a particular class of districts, and, by necessary implication, withheld from all other districts, but in the latter part of said section 78 it is enacted that “the special provisions of this act for their own class of districts shall apply only to such districts.” As we understand this provision, it very plainly excludes the idea that the special provision made for special drainage district bonds is applicable to sub-districts under section 13, without such sub-districts are autonomous and complete special drainage districts within themselves.

Even if bonds for postponed and unpaid assessments could lawfully be issued by or on behalf of a sub-district organized by the commissioners of a special drainage district, yet there would be a serious and fatal objection to the bonds here in question. These bonds were issued by the Lake Fork Special Drainage District, in the counties of Piatt, Champaign and Douglas, and State of Illinois, and contain absolute and positive promises on the part of said Lake Fork Special Drainage District to pay the several sums of money mentioned in them, respectively, and by the terms of the contract the faith of said Lake Fork Special Drainage District is irrevocably pledged for the payment of the principal sums named in said bonds, and the interest coupons attached. It is true that in the body of the bonds the statement is made that they are “issued on the second assessment of sub-district No. 10 of said Lake Fork Special Drainage District, ” and also the further statement that for payment of the bonds and coupons, “together” with the faith of the main district, is pledged “the unpaid assessment above-described in sub-district No. 10, becoming due September 1, 1892, upon which this bond and coupons attached are based, and are constituted a special lien for the payment thereof.” They do not purport, however, to be the bonds of the sub-district, or to be payable only out of the proceeds of the unpaid and postponed assessment of the sub-district, but the promise of the main district to pay is direct and unconditional. In the coupons attached, there is no reference whatever to either the sub-district or any assessment, and all that is found in them are simple and unqualified promises on the part of the Lake Fork Special Drainage District to pay the bearer, at the place and times mentioned therein, the sums of interest money specified in them, respectively. Section 43 of the Drainage act provides, as we have heretofore stated, that the funds arising from assessments made in sub-districts “shall be kept as a1 separate and distinct fund, to be used in the sub-district from which it was collected,” and that the formation of sub-districts shall not give to any such sub-district “any claim upon the funds of the main district for its local use. ” We can not accede to the suggestions made by petitioners, that the promises to pay, made in the bonds and coupons, are simply promises to pay by or with the unpaid assessment in sub-district No. 10, and that the language, “for the payment of which principal sum, and the interest coupons attached, the faith of said Lake Fork Special Drainage District is hereby irrevocably pledged,” is simply a pledge by the commissioners that the unpaid and postponed assessment will be used in the payment of the bonds at their maturity, and that the corporate authorities will exercise whatever power is given to or duty imposed on them by law, towards the payment of the interest on such bonds as the same accrues. The contracts attempted to be made by the Lake Fork Special Drainage District are plain and unambignous, and the language used in the bonds and coupons "will not bear the construction sought to be placed upon it. The •drainage district had no power, under the law, to issue bonds binding itself for the payment of an assessment made in one ■of its sub-districts, for work done in and solely for the local benefit of such sub-district.

Our conclusions upon the case presented by the record are, that while the commissioners of Lake Fork Special Drainage District had power, under the statute, to form sub-districts,. jet that they had no lawful authority to issue bonds for an unpaid assessment made in one of said sub-districts, or for any part thereof; and that even if they could be held to be vested with such authority, the bonds here involved would not be legal, and such as they could lawfully issue.

For the reasons herein stated, the demurrer to the answer •of the Auditor of Public Accounts is overruled, a writ of man-damns is denied, and the petition dismissed at the cost of the petitioners.

Writ denied.


source: Caselaw Access Project

author: Mr. Justice Magruder

license: Public Domain

text:
    Arthur W. Windett v. The Connecticut Mutual Life Insurance Company et al.

      Filed at Ottawa

      October 31, 1889.

    1. Chancery—decree in violation of agreement—as, taking a decree ■of foreclosure after an agreement to extend the time—remedy. The holder of a mortgage exhibited his bill in chancery in the Circuit Court of the United States, for a foreclosure. Personal service was had on the mortgagor, his default entered, decree of foreclosure, and sale, the mortgagee being the purchaser. After the statutory time for redemption had expired, the master made a deed. Subsequently, the mortgagor ■exhibited his bill in chancery in the circuit court of Cook county, in this State, to redeem, alleging that the decree of foreclosure in the United States court was taken in violation of an agreement by the mort.gagee to extend the time of payment of the mortgage debt, and to ■reduce the rate of interest: Held, that conceding the ground for relief to have been established, the remedy of the mortgagor was by application in apt time to the court in which the suit for foreclosure was. pending, where, upon a proper showing, appropriate action would be taken.
    2. Res judicata—as to defense not made. A final decree of the United States Circuit Court, finding the sum due and ordering a sale of mortgaged premises for the debt and costs, is conclusive of the fact that the mortgage debt was due and of the sum due, and the mortgagor can not be heard to allege, by bill seeking to redeem, that the decree of foreclosure was taken in violation of an agreement to give further time for payment and a reduced rate of interest. These being matters involved in the issues passed upon in the suit to foreclose, became res judicata, and not open to re-litigation.
    Appeal from the Appellate Court for the First District;—heard in that court on appeal from the Circuit Court of Cook county; the Hon. Murray F. Tuley, Judge, presiding.
    Mr. W. C. Goudy, Mr. John Woodbridge, and Mr. William P. Black, for the appellant.
    Messrs. Isham, Lincoln & Beale, for the appellees
   Mr. Justice Magruder

delivered the opinion of the Court:

Windett executed to the Connecticut Mutual Life Insurance Company the following mortgages : one for $30,000.00, dated April 16, 1873, due in five years, with interest at nine percent per annum, on a lot on State Street in Chicago; one for $10,000.00, dated Nov. 1Í, 1873, due April 16,1878, at 9 per cent interest, on same lot; one for $20,000.00, dated Nov. 18, 1875, payable in 5 years, with 8 per cent interest, on the north half of 40 acres in section 8, etc., in Cook Co.; one for $20,-000.00, dated Nov. 18,1875, payable in 5 years, at 8 per cent interest, on the south half of said 40 acre tract; a second mortgage, dated Nov. 18,1875, on said 40 acre tract, subject to the last two mortgages and given as additional security for the said mortgages on the State Street lot; a mortgage for $4500.00, dated June 18, 1866, due June 18, 1871, with interest at 8 per cent, on a lot on Milwaukee Ave. in Chicago j a second mortgage on said Milwaukee Avenue lot, for $10,-000.00, dated April 16, 187'5, due April 16,1880, and drawing nine per cent interest. The amount of these mortgages, $94,-500.00, represented money loaned by the Company to Windett.

Prior to March, 1879, the appellant, Windett, had neglected for several years to pay any interest upon this indebtedness, or any taxes upon the property mortgaged, and had suffered some of the property to be sold for taxes. Accordingly the Insurance Company, one of the appellees herein, filed bills, in March, 1879, in the Circuit Court of the United States for the Northern District of Illinois, to foreclose said mortgages, some of them having become due by their terms, and others having been declared due for non-payment of interest and taxes in-accordance with provisions therein contained. Appellant was duly served with process in the foreclosure proceedings, both upon the filing of the original bills, and of the amended and supplemental bill hereinafter mentioned. He was also present at the taking of testimony before the Master in the causes, and was duly informed of all the steps taken therein, but he filed no answers and made no defense, and failed to bring to the attention of the Federal Court the alleged agreements hereinafter mentioned.

The bill to foreclose the mortgages upon the Milwaukee Avenue property was filed March 17, 1879; default was taken and the cause referred to the master on Nov. 23,1880; decree of sale was entered on June 22, 1881; sale was made by the master on September 23,1881, and the property was bought by the Insurance Company, to which a master’s deed was issued on January 29, 1883, the appellant having failed to redeem.

The bill to foreclose the mortgages upon the property on State Street and in section 8 was filed on March 15, 1879; an amended and supplemental bill was filed April 6, 1880; orders pro confesso and of reference were entered on November 23, 1880; decree of sale was entered on July 16, 1881; sale by the Master to the Insurance Company was made on November 17, 1881, and master’s deed in pursuance of the sale was executed on February 19, 1883, there having been no redemption.

After the filing of the bill filed on March 15, 1879, appellant, on June 27, 1879, executed a mortgage to the Company upon six inches of ground north of and adjoining the State Street lot, as additional security for the $40,000.00 loaned upon that lot, and because the north wall of .the building erected by appellant upon said lot with the money borrowed by him rested upon said six inches. On July 28, 1879, appellant also executed to the Company a mortgage upon 40 acres of land in section 14, etc., known as the Parker tract, as further security for the indebtedness upon the State Street property. The Company paid off certain liens upon the 40 acres in section 14, amounting to $6000.00, and took from appellant another mortgage, dated March 16,1880, upon said 40 acres to secure appellant’s bond for $6000.00, payable on demand, and drawing 8 per cent interest. The object of filing the supplemental bill was to foreclose the mortgages upon the six inches and upon the Parker tract. '

When the loans of $40,000.00 were made upon the State Street lot in 1873, there rested upon it an old mortgage, dated in 1857, for $20,000.00, owned by one Catherine Parpart, and which seems to have been regarded as invalid both by appellant and the Insurance Company. A bill to foreclose this Parpart mortgage was filed in the United States Circuit Court in 1875 against appellant and the Insurance Company; a decree was rendered on July 28,1879, in favor of Parpart for the $20,000.00 and interest, and a receiver was appointed to take possession of the State Street lot and the building thereon; upon appeal to the Supreme Court of the United -States, that Court sustained the Parpart decree; on July 14,1883, there was due on this Parpart decree $46,158.82, of which the Insurance Company paid $34,937.62, and the remainder, $11,221*20, was paid out of rents accumulated in the hands of the receiver.

The decree, rendered against appellant in the foreclosure of the Milwaukee Avenue mortgages, was for $21,425.70, and the decree rendered in the suit to foreclose the other mortgages, was for $136,697.41.

In the present ease, the appellant filed his bill in the Circuit Court of Cook County on June 17, 1885, for the purpose of redeeming the foregoing property from the foreclosure sales made under the decrees of the United States Circuit Court, and charging that the foreclosure proceedings in the Federal Court were consummated by the Insurance Company in violation of certain agreements with appellant, and that, by reason of such agreements, the Company holds its title to the property in question subject to the right of appellant to redeem the same. Answers were filed to the bill by the defendants thereto, the Insurance Company, Mark Skinner, Anson Sperry and Henry P. Isham. After hearing, the Circuit Court of Cook County dismissed the bill for want of equity, and its decree has been affirmed by the Appellate Court. The case is brought to this Court by appeal.

Appellant claims that, after the foreclosure bills were filed in the Federal Court, the Insurance Company agreed with him to extend the time for the payment of the monies secured by the mortgages, and to reduce the rate of interest, required to be paid by the terms of the mortgages. The first question is as to the existence of the agreements contended for, and we do not think that the appellant has succeeded in proving any such agreements. We will advert to a few of the facts and circumstances upon this subject, which are found in the record.

On March 18,1879, appellant wrote a letter to Skinner, the Chicago correspondent of the Insurance Company, in which he submits the following proposition: “Let the loans he renewed for, say, five years, at six per cent, per annum, and I will give as additional security 40 acres of land in * * * sec. 14, etc.” On July 28,1879, E. S. Isham-, the attorney of the Company, requested appellant to execute, and appellant did then execute to the Company, the mortgage dated July 28, 1879, upon the 40 acres in Sec. 14. Appellant says that the acceptance of the mortgage on the Parker tract was the acceptance of the proposition submitted by him on March 18, 1879, and that the consideration for the giving of the mortgage was the. renewal of the loans for five years at six per cent interest. The weight of the testimony is against him in regard to this matter.

E. S. Isham swears that the letter of March 18, 1879, and the mortgage of July 28, 1879, had no connection with each other; that the Federal Court on July 19, 1879, decided the Parpart mortgage to be valid and prior to the mortgages of the Insurance Company as a lien upon the State Street lot; that the notes secured by the Windett mortgages were judgment notes, and, owing to the impairment of the Company’s securities by the Parpart decision, he prepared the papers to enter up judgments so as to get liens upon the property of appellant not embraced in the mortgages; that, in consideration of his refraining from so entering up judgments, appellant agreed to give and did give the mortgage on the Parker tract as additional security.

Judge Skinner swears, that he submitted appellant’s proposition of March 18, 1879, to the officers of the Insurance Company at Hartford, Connecticut, by letter, and on March 20, 1879, received the following reply: “We can not consider any proposition for delay from Windett which does not include a satisfactory settlement of all arrears and protection against defaults in future; ” that, while he can not remember the fact of communicating the contents of this dispatch to appellant, he has no doubt that he told him the purport of it, and that “Mr. Windett must have known it very soon afterwards some time, because he was always very careful about finding out. ” It is not shown, that, before July 28,1879, any settlement was made of “all arrears,” or any protection furnished against future defaults. That Skinner had no authority to act upon the proposition of July 18, 1879, without submitting it to his principals at Hartford, was well known to the appellant, as the proofs abundantly show.

Again, on July 31, 1879, appellant wrote a letter to Isham & Lincoln, attorneys of the Insurance Company, in which he says, among other things: “I respectfully request, 1. a renewal of the loans for five years, 2. a reduction of the rate of interest on all my indebtedness to six per cent, which is all I can pay.”' If, as appellant claims in his bill and in his testimony, he had-a binding agreement with this company, which was perfected and closed on July 28, 1879, by which it agreed to extend his. loans five years and reduce his interest to six per cent, why did he write the letter of July 31, 1879 ? It is inconceivable, that a man should ask as a favor on July 31 that which he had already acquired by contract entered into on July 28.

On March 31,1880, appellant wrote a letter to Greene, the President of the Company at Hartford, saying: “I have had some conversation with Judge Skinner * * * with a view to obtain an extension of time upon my loans * * * and to have the interest reduced to 6 per cent.” On June 15, 1880, he writes to Greene: “Allow me to inquire whether the company has concluded to entertain favorably the proposals I laid before you * * * as per my letter of March 31st.” On July 7, 1880, he writes to Isham & Lincoln: “I beg to- submit the following basis of agreement respecting my loans * * * 1st. Let the several loans be extended for three years from the present time, 2nd, that interest on the same be reduced to five per cent per annum, taking effect Jan. lr 1878,” etc. These letters are inconsistent with the theory of a contract formed out of the proposal of March 18, 1879, and the mortgage of July 28, 1879.

But appellant sets up another contract for extension of time’ and reduction of interest alleged to have grown out of a proposition made in January, 1881, and accepted, as he claims, in April, 1881. The proof fails to establish any such contract. On February 26, 1881, appellant handed to Judge Skinner a written memorandum or proposal, dated January 22, 1881, containing these words: “Basis of arrangement with Conn. Hut. L. I. Co. That all loans be extended to three years from July, 1880, and that the interest thereon be reduced to six percent from Jan. 1, 1879.” This memorandum also contained a proposition to subdivide the 40 acres in section 8 into blocks, lots, streets, etc., and to sell certain blocks and lots, the company to give releases, and so much to be paid upon the parts released. This proposition was forwarded by Skinner to the Company. Appellant states that Skinner met him on the street on April 15, 1881, and in answer to a question about the proposition of Jan. 22, 1881, said that the Company had agreed to the proposition. The proposition so submitted and the interview of 'April 15, 1881, are said to constitute the second contract.

Skinner contradicts appellant in the following words: “I could not have said any such thing at any time in reference to the proposition of January 22, 1881. * * * I never said anything only what the Company authorized me to say, and I never had any authority from the company to say any such thing.” It appears that, through the influence of Skinner, the Company did release 2J acres to the appellant on July 27,1881, but appellant raised money by mortgaging the part so released, and used the money for his own private purposes, making no payment out of it upon his indebtedness to the company.

Greene swears, that no arrangement whatever was entered • into with the appellant upon the basis of the proposition of January 22, 1881, and that he charged the appellant, in an interview had with him on April 28, 1881, with scheming to inveigle the company into some statement that would look like a contract for extension.

After the decrees of sale were entered, appellant had an interview with Taylor, the Secretary of the company at Hartford, in the summer of 1881, in which he states that Taylor told him no steps would be taken under said decrees. Taylor denies this in toto in his evidence. A letter, dated September 20, 1881, written by Taylor to appellant, in reply to a letter from appellant, dated September 14, 1881, is produced, in which Taylor says: “Replying to your favor of the 14th instant, I beg to say that you are under a misapprehension in. attributing to me a promise that no steps should be taken upon the decrees in your matters, etc.”

In reply to a letter, dated July 2, 1881, written to him by appellant, Judge Skinner writes to appellant on July 7,1881, and, referring to appellant’s statements about the memorandum of Jan. 22, 1881, he says: “If you mean to imply that any such arrangement was made with me for the company, or with the company in any wise, then you state what I do not understand to be the case. I do not know of any arrangement of any kind made by you with the company, or with me acting for the company.”

The evidence in this case is very voluminous. We cannot further discuss it. We have only referred to a few items' of it. We are satisfied, from an examination of it, that the agreements for extension of time and reduction of interest, as they are set up and insisted upon by the appellant, were never made by the Insurance Company. Appellant’s statements upon this subject rest upon his own testimony exclusively, while over against them stands an overwhelming mass of evidence oral and documentary.

But let it be admitted that we are wrong in our construction of the evidence, and that there were really such agreements as are contended for. What then? Appellant should have applied for relief to the Federal Court in which the foreclosure proceedings were pending. He is an able and experienced lawyer. He says that he was surprised at the prosecution of the foreclosure suits by the company, and regarded the filing of the supplemental bill, the taking of the defaults, the entry of the decrees of sale and the sales thereunder, as being gross violations, each and all of them, of his understanding with the company. If he had gone before the Federal Court when the defaults were taken, and produced evidence of an agreement to suspend the foreclosures and extend the time of payment, that court would undoubtedly have set aside the defaults and dismissed or stayed the proceedings. It would have delayed the sales even after the decrees were entered upon proof of such agreement.

At any rate, the Federal Court had jurisdiction of the person of the appellant by due service of process upon him, and also jurisdiction of the subject matter of the litigation before it. One of the questions involved in the issues presented to that Court was the right of the Company to foreclose its mortgages. If the Company had agreed to extend the payment of the mortgage indebtedness for five years, it was wrongfully proceeding to foreclose, and such agreement was proper matter of defense to be set up against the assertion of the right to foreclose. Another question involved in the issues before the Federal Court was the amount of indebtedness upon the mortgages. If there was an agreement that that indebtedness should draw only six per cent interest from a specified date, ’ then it was wrong to enter decrees for interest at the rate of eight and nine per cent, and proof of such agreement could have been introduced by the defense, under the issues involved, to lessen the amount to be recovered.

Hence, it is manifest that the agreements, which we are now asked to enforce, involve not only matters over which the Federal Court had jurisdiction, but matters, which were embraced within the issues passed upon by that Court. It follows, that its decrees,- unreversed by a direct proceeding, are final adjudications, so far as we are concerned, upon the subjects now urged upon our consideration. We have no power to review, change or annul those decrees.

The judgment of the Appellate Court is affirmed.

Judgment affirmed.


author: Mr. Justice Bailey

text:
    Edward W. Morrison et al. v. Harry Herrick et al.

      Filed at Ottawa

      October 31, 1889.

    1. Statute or Frauds—verbal sale or lease of land—part performance, to take a case out of the statute. In equity, verbal contracts for the sale of lands will be enforced when they have been so far performed by one party that to permit the other party to repudiate them, would, of itself, be a fraud. Equity will not permit a suitor to make use of the Statute of Frauds as a means of perpetrating a fraud, as that would defeat the very purpose for which the statute was enacted.
    2. Taking and retaining possession of land by the purchaser, with the consent of the vendor, and making valuable improvements, constitute such part performance as will justify a court of equity in enforcing the oral contract.
    3. To take a verbal contract out of the Statute of Frauds, however, the acts of part performance, whatever they may be, must refer exclusively to the contract, and be such as would not have been performed but for the contract. They must be such as can not be explained consistently with any other contract than the one alleged,—that is, they must refer to, result from, and be done in pursuance of, such contract.

      4. If, therefore, possession is relied upon as an act of part performance, it must be possession under the contract sought to be enforced. The continuance of possession taken before the contract was made, is not usually held to be sufficient. This rule applies especially to cases where the previous holding was under a lease.
    5. Same—extension of lease by verbal agreement—continued possession—making improvements, eta. Where, before the termination of a lease, there was an oral agreement between the landlord and tenant for a new lease of five years, the fact that the tenant refused to accept a new lease for only one year, upon the express ground that he was entitled to a lease for five years, and the promise of the lessor to make a lease for the five years, is evidence that the possession of the lessee after the termination of the original lease was under the oral contract for the new lease of five years, and not a'mere holding over.
    6. The expenditure of money by the tenant in making costly improvements on the premises, on the faith of an oral agreement for a term of years, may be viewed, not only as constituting, of itself, part performance sufficient to take the case out of the statute, but as furnishing strong, if not conclusive, evidence that the possession is continued under the oral contract, and not under the original lease.

      7. Notice—possession of tenant—under verbal agreement for a new lease. The possession of a tenant under an oral contract with his landlord for a further term, will be notice to a third party who accepts a lease of the same premises from the landlord, of the tenant’s rights under the oral contract.
    8. Ptjbchaser without notice—but who has paid nothing. A person leasing premises, who pays nothing before he has actual knowledge of the rights of a prior tenant for a renewal of his lease, will not be protected as a bona fide and innocent purchaser.
    9. Laches—not asserting a right until it is questioned. Where one entered into the occupancy of premises under a lease, and continues in possession after the expiration of the term, under a verbal agreement for a new lease for a term of years, and is in the full enjoyment of his rights under the verbal contract, he is under no legal duty to bring suit in respect of such rights, at least until he is in some way apprised that they are about to be threatened or denied.
    Appeal from the Appellate Court for the First District;— heard in that court on appeal from the Circuit Court of Cook county; the Hon. Bichard S. Tuthill, Judge, presiding.
    Mr. L. H. Boutell, for the appellants:
    As the appellees were in possession, under their written lease, for one year, and not under their equitable claim, their possession was notice to Miner, Beal & Co. only of the title 'under which they entered. McMahon v. Griffin, 3 Pick. 154; Matthews v. Demeritt, 22 Me. 215; Grundies v. Reid, 107 Ill. 304; Pickerell v. Morss, 97 id. 220.
    To take a verbal contract for the sale or lease of land out of the Statute of Frauds on the ground of part performance, there must be possession under the contract. The possession of a tenant under a prior lease, or who holds over, is not sufficient. Wood v. Thornly, 58 Ill. 469; Padfield v. Padfield, 92 id. 203; Pickerell v. Morss, 97 id. 220; Kaufman v. Cook, 114 id. 11 ; Whiting v. Opera Co. 88 Pa. St. 101; Mahana v. Blunt, 20 Iowa, 42; Johnston v. Glancey, 4 Blackf. 94; Johns v. Johns, 67 Ind. 440; Carlisle v. Brennan, id. 12; Eargood’s Estate, 1 Pearson, (Pa.) 400.

      The possession of the appellees was not of such a nature as to entitle them to a decree for a specific performance, it not being under the contract. Wood v. Thornly, 58 Ill. 469; Padfield v. Padfield, 92 id. 203; Pickerell v. Morss, 97 id. 220; Kaufman v. Cook, 114 id. 11 ; Whiting v. Opera Co. 88 Pa. St. 101; Mahana v. Blunt, 20 Iowa, 142; Johnston v. Glancey, 4 Blackf. 94; Johns v. Johns, 67 Ind. 440; Carlisle v. Brennan, id. 12; Eargood’s Estate, 1 Pearson, (Pa.) 400.
    In respect to Miner, Beal & Go., appellees were guilty of laches in not commencing proceedings to enforce their rights at an earlier day, and in not notifying these appellants of their claims after they had notice that these appellants were about to execute a lease of the premises.
    If the court should be of opinion that the appellees have a claim against Morrison, the decree should not be for specific performance, but for damages to the extent of their permanent improvements, in view of the rights of these appellants, as well as of the peculiar character of appellees’ possession. Worth v. Worth, 84 Ill. 442; Lord Pengall v. Ross, 2 Eq. Ga. Ab. 46, pi. 12; Anthony v. Leftwich, 3 Rand. (Va.) 238; Johnston v. Glancey, 4 Blackf. 95; Phillips v. Thompson, 1 Johns. Ch. 131; Parkhurst v. VanCortlandt, id. 273; Wack v. Sorber, 2 Whart. 387; Heft v. McGill, 3 Barr, 256; Harden v. Hays, 9 id. 151; Goodwin v. Lym, 4 Port. (Ala.) 297; Boze v. Davis, 14 Texas, 331; Albea v. Griffin, 2 D. & B. Eq. 9; Baker v. Carson, 1 id. 381; Dunn v. Moore, 3 Ired. Eq. 364; King v. Thompson, 9 Pet. 204; Evans v. Battle, 19 Ala. 398.
    Mr. S. K. Dow, for the appellant Edward W. Morrison:
    In order to take an oral agreement in respect to an interest in land, not to be performed within one year, out of the operation of the Statute of Frauds,—if it is sought to do this by proving that valuable improvements have been made upon the premises by the lessee or grantee, as the case may be, upon the faith of an oral agreement,—it must be clearly shown that such improvements were made by the party while in possession of the premises acquired under and by virtue of the oral agreement sought to be enforced, and not otherwise. This is the settled law of Illinois, established by the following cases: Wood v. Thornly, 58 Ill. 469; Padfield v. Paifield, 92 id. 198; Bohanan v. Bohanan, 96 id. 591; Warren v. Warren, 105 id. 568; Kaufman v. Cook, 114 id. 11; Long v. Long, 118 id. 638.
    Messrs. Smith & Forch, for the appellees:
    Part performance will, in equity, take a parol agreement out of the Statute of Frauds. If the tenant has been put to expense on the faith of a promise of a lease, equity will decree its execution. Earl of Aylesford’s case, 2 Strange, 783.
    If, at the time of the agreement, the complainant be in possession under a lease, whether expired or not, his possession will be referred to this lease, and, of itself, will be no evidence of a new agreement for a further lease. Pomeroy on Contracts, secs. 123-125.
    But when the part performance consists of valuable improvements and large outlays, then the fact of possession cuts no figure, provided the improvements and outlays are of such an extent and kind that they are reasonably referable to an agreement for a new lease. Pomeroy on Contracts, secs. 124, 125; Fry on Specific Perf. secs. 401, 402; Browne on Statute of Frauds, sec. 478; Roberts on Frauds, 132.
    The doctrine of equitable estoppel is applied when to allow the party to repudiate the contract would operate as a fraud. Warren v. Warren, 105 Ill. 568; Irwin v. Dyke, 114 id. 302.
    When taking possession and making permanent improvements are relied on as sufficient part performance, these acts must be performed after and under the agreement. Pomeroy on Contracts, sec. 106; Mundy v. Joliffe, 5 M. & C. 177; Wright v. Puckett, 22 Gratt. 374; Neale v. Neale, 9 Wall. 112; Swain v. Seamans, id. 254.

      Where the grantor in a deed is found in possession after its execution, it is notice to the world of any equitable interest which he may have, as against the legal title which he himself has thus conveyed. Metropolitan Bank v. Godfrey, 23 Ill. 579; Smith v. Jackson, 76 id. 254; Flint v. Lewis, 61 id. 299 ; Russell v. Howard, 59 id. 335; Strong v. Shea, 83 id. 575; Terry v. Pfeifer, 18 Wis. 510.
    A party who has paid nothing before notice of an adverse claim is not a bona fide .purchaser. Brown v. Welch, 18 Ill. 343.
   Mr. Justice Bailey

delivered the opinion of the Court :

In this case, Harry Herrick and Charles K. Herrick filed their bill in chancery against Edward W Morrison, to compel the specific performance by him of an oral agreement, alleged to have been made on or about June 1, 1884, for a lease, for a term of five years from May 1, 1885, of a certain store and basement known as number 115, East Madison street, Chicago. George A. Miner and others, comprising the firm of Miner, Beal & Co., were also made parties defendant, it being alleged that said Morrison had fraudulently executed to them a lease of said premises, and had entered into an unlawful and fraudulent conspiracy with them to eject the complainants therefrom, and to deprive them of their right to the possession and enjoyment thereof. The bill prayed that said lease to Miner, Beal & Co. be held to be subject to the complainants’ rights and inoperative as against them, and that said Miner, Beal & Co. be restrained from interfering with the complainants’ possession of said premises.

Defendant Morrison answered denying said oral agreement and setting up the Statute of Frauds, and also admitting that he had demised said premises, together with certain other premises thereto adjoining, to Miner, Beal & Co. for the term of five years from May 1, 1886. Miner, Beal & Co. answered and filed their cross-bill, asserting the validity of said lease to them, and the priority of their rights thereunder, and praying that the complainants in the original bill be decreed to surrender and deliver up said premises to them. A demurrer to the cross-bill was sustained, and the cause coming on for hearing as to the original bill on pleadings and proofs, a decree was rendered in accordance with the prayer of said bill. Said decree was affirmed by the Appellate Court, and the record -is now brought here on appeal from that court.

It appears that Edward W. Morrison is, and for many years has been, the owner of a four-story business building on the north-east corner of Clark and East Madison streets, Chicago. The first story of said building is divided up so as to be used by several occupants for mercantile purposes, there being, in addition to one or more stores on the corner not in controversy here, three stores fronting on East Madison street known as numbers 113, 115 and 117, and a double store fronting on Clark street known as 131 and 133. For several years prior to the time said oral agreement is alleged to have been made, the complainants had occupied number 115, East Madison street, as a hat and cap store, under yearly leases executed by Morrison to them, and at the date of said oral agreement, they were occupying it under a written lease for the term commencing May 1, 1884, and ending April 30, 1885, the rent reserved being $3000 payable in monthly installments of $250 each.

The allegations of the bill in relation to the making of the oral agreement and the circumstances connected therewith are, in substance, that the complainants, during the time they had occupied said premises, had been doing a flourishing, profitable and constantly increasing business, and that they and their place of business had become widely known to the public; that for the purpose of retaining their position and competing successfully with rival establishments, and of still extending their business and patronage, it became very desirable that they should make extensive and costly improvements in their store, provided they could obtain a further lease for .a sufficient length of time to warrant such expenditure ; that they so informed said Morrison, and proposed to him, that if he would grant to them a lease of said premises for a term of five years, to commence at the expiration of their then existing lease, they would make certain expensive and permanent improvements in said store, and would also put in new and ■expensive cases and fixtures, thus rendering it as fine if not the finest and most beautiful and attractive hat and cap store in the city of Chicago; that said Morrison approved of and assented to said proposition, and that it was thereupon agreed between him and the complainants that he would execute to them a further lease of said premises for the term of five years, beginning on the first day of May, 1885, and continuing until the 30th day of April, 1890, at a yearly rental of $3000 for the first year, payable in monthly installments of $250, and at a yearly rental of $3300 for each of the four remaining years, payable in monthly installments of $275 each.

It appears from the evidence, without any material controversy, that shortly after the time this agreement for a lease is alleged to have been made, the complainants proceeded to make their proposed improvements, those of a permanent character consisting of expensive panel work upon the ceiling, fresco painting on the walls, remodeling the front doors and windows and putting in stained or cathedral glass, costing in •all about $1700. They also constructed new cases of hard wood and plate glass, fitted and adapted to the store, with pulleys to raise and lower the doors and sashes, and also plate .glass mirrors fitted and adapted to the spaces which they were to occupy on the walls, the total expense of such fixtures being about $3300. To make room for these fixtures, those previously in use, and which cost $700, were removed and disposed of for only $150, that being all they would bring. A new furnace and new gas-fittings were put in at a cost of .about $490. These expenditures were all made during the months of July and August, 1884. The time occupied in fitting up the store in the manner above indicated was from four to six weeks, and during that time the complainants’ business, was largely if not wholly interrupted, thus causing them considerable additional loss.

The evidence in relation to the alleged contract for a lease-is in some degree conflicting, but after giving it careful consideration, we are of the opinion that it is sufficient to warrant the finding of the chancellor that such contract was in fact made. We are not disposed to attempt an analysis of said evidence in detail, but shall content ourselves with the general statement that four witnesses testify positively to the-making of the contract, viz., Isaac Gardner, Louis Kohn and. the complainants, and their testimony is to the effect that,, sometime in the latter part of May or the first part of June,' 1884, they and the defendant Morrison were together in the-complainants’ store, and that a conversation was then and there had between Morrison and the complainants, in which, the complainants stated their desire to fit up their store so-as to make it one of the most attractive in Chicago, by putting into it elaborate and costly improvements and fixtures, at an expense, as they then estimated, of from $6000 to. $10,000, and that they would do so, provided they could get from Morrison a lease for the term of five years from the expiration of their then existing term; that Morrison thereupon agreed with the complainants, in view of their proposed heavy expenditures, to give them a lease of said premises from May 1, 1885, to April 30, 1890, the rent to be $3000 for the first, year, and $3300 per year for the four remaining years. The.testimony of these witnesses is corroborated, in some degree at least, by the evidence of several witnesses who testify to certain subsequent admissions of Morrison, both express and implied, which tend to show that he had rented said premises to-the complainants for a term of several years. One of the complainants also testifies that, about May 1, 1885, he was notified to go to Morrison’s office to sign the lease, and that on going there he was presented with the draft of a lease for only one year, which he refused to sign, and that Morrison, on his attention being called to the fact that the draft was not in accordance with the agreement, said that it was his clerk’s mistake and that he would have it corrected.

Defendant Morrison, on the other hand, testifies that no such contract as that alleged by the complainants was made, and that no such conversation as that testified to by their witnesses ever took place. His testimony, however, receives but little if any corroboration from the other witnesses. It is in direct conflict with that of all those who claim to have been present at the time the contract is said to have been made, and the only mode in which his counsel have undertaken to bolster up his testimony is, by indulging in somewhat captious criticisms upon the account of the transaction given by the complainants’ witnesses, and by urging the improbability that business men like the complainants would be content to rely, in so important a matter, upon the mere oral agreement of their lessor. The chancellor who tried the cause and who saw and heard the witnesses, reached the 'conclusion that the testimony of the complainants and their witnesses in relation to the contract was true, and the record, so far as we can see, furnishes no ground which can justify us in holding the contrary.

Beyond what has already been stated, no effort seems to have been made by the complainants, prior to the commencement of their suit, to obtain from Morrison the execution of a lease in pursuance of his oral agreement. They claim to have been on very friendly, and even intimate terms with him, and that they therefore trusted him more implicitly than they would have done under other circumstances. On the 30th day of April, 1888, the complainants’ term under their former lease expired, but they remained in possession and continued to pay Morrison rent at the rate of $3000 per year. They claim that their possession, on and after May 1, 1885, was under the oral lease for five,years, while Morrison and the other defendants insist that the complainants, by remaining in possession, merely assumed the position of tenants holding over under their former lease.

It appears that for several years prior to May 1, 1885, Miner, Beal & Co. had been occupying number 117, East Madison street, and also numbers 131 and 133, Clark street, as a clothing store, under leases from Morrison. In the summer of 1885, desiring to enlarge their establishment, they entered into a negotiation with Morrison for a lease, for a term commencing May 1, 1886, of the premises then occupied by them, and also of numbers 113 and 115, East Madison street. These negotiations resulted, about September 1, 1885, in the execution by Morrison to Miner, Beal & Co. of a written lease demising t-o them all of the foregoing premises for the term of five years from May 1, 1886. The complainants seem to have had no notice of said negotiations or of the resulting lease, until a considerable time after the lease was executed, and then having heard of them by rumor, they made inquiries and ascertained the facts, and shortly afterward they brought this suit.

Regarding the oral contract for a lease as sufficiently proved, the question arises whether such part performance has been shown as will take it out of the operation of the Statute of Frauds. The authorities in this country as to what acts of part performance will be sufficient, in the view of a court of equity, to take an oral contract for the sale or lease of lands out of the statute are not altogether harmonious, and this court has not been disposed to carry the doctrine of part performance quite to the extent to which it has been carried by the decisions of some of the courts. Certain acts of part performance, however, have uniformly been held sufficient. Thus, we have held in many cases, that taking possession of the land with the consent of the vendor, paying the purchase money, and making lasting and' valuable improvements, are sufficient acts of part performance to justify the specific performance of an oral contract of purchase. Thornton v. Heirs of Henry, 2 Scam. 218; Updike v. Armstrong, 3 id. 564; Stevens v. Wheeler, 25 Ill. 300; Blunt v. Tomlin, 27 id. 93; Mason v. Bair, 33 id. 194; Fleming v. Carter, 70 id. 286; Laird v. Allen, 82 id. 43; McNamara v. Garrity, 106 id. 384; Gorham v. Dodge, 122 id. 528. In other cases it is held that taking possession and paying the purchase money is sufficient. Fitzsimmons v. Allen’s Admr. 39 Ill. 440; Temple v. Johnson, 71 id. 13; Ferbrache v. Ferbrache, 110 id. 210; Ramsey v. Liston, 25 id. 114; Shirley v. Spencer, 4 Gilm. 583. In other cases it is held that taking possession and making valuable improvements is sufficient part performance, Keys v. Test, 33 Ill. 316; Kurtz v. Hibner, 55 id. 514; Wood v. Thornly, 58 id. 464; Langston v. Bates, 84 id. 524; Kaufman v. Cook, 114 id. 11; Bohanan v. Bohanan, 96 id. 591; Bright v. Bright, 41 id. 97; Padfield v. Padfield, 92 id. 198. It is under the rule established by the decisions last cited that the complainants in this case must base their right to have their oral contract for a lease specifically enforced.

The evidence shows beyond controversy that the complainants expended large sums of money in making permanent improvements upon the demised premises and in fitting up and furnishing the same for use in carrying on their business, and it is equally beyond controversy that these expenditures were made under and in reliance upon the oral contract for a lease for a further term of five 3rears. So far then as the making of valuable improvements can constitute an element •of part performance, the complainants have established their right to a decree. It is true the improvements were all made before the term contemplated by the oral agreement was to commence, and while the complainants were in possession under their former lease, but that circumstance does not seem to us to be material, so long as the improvements were in fact made in reliance upon and in pursuance of the provisions of the oral agreement.

. The more difficult question relates to the possession which the complainants must establish and rely upon as an act in part performance. It is undoubtedly the rule that acts of part performance, whatever they may be, must refer exclusively to» the contract, and be such as would not have been performed but for such contract. They must be such as can not be explained consistently with any other contract than the one-alleged, that is to say, they must refer to, result from, and be-done in pursuance of such contract. If therefore possession is relied upon as an act of part performance, it must be possession under the contract sought to be enforced. The continuance of possession taken before the contract was made is accordingly not usually held to be sufficient. 2 Reed on Stat. of Frauds, sec. 585. This rule applies especially to cases, where the previous holding is under a lease, for as the tenant may lawfully continue in possession until notice to quit, such continuance in possession is presumptively referable to the-lease. It has therefore been sometimes questioned whether, as between landlord and tenant, part performance is possible. But the better doctrine would seem to be, that one continuing in possession is at liberty to prove, if he can, that his possession, after the termination of the former lease, is under the-oral contract.

The expenditure of money by the tenant in making improvements on the premises, on the faith of the oral agreement for a lease, may be viewed, not only as constituting of itself an act of part performance, but as furnishing strong if not conclusive evidence that the possession is continued under the oral contract and not under the lease. On this subject it is-said by Mr. Browne: “It is always regarded as strongly confirmatory of the right of a plaintiff seeking the specific performance of a verbal contract for an estate in land, that he has proceeded, upon the faith of the contract, and with the knowledge of the vendor, to expend money in improving the land. In cases of purchasers who were, before and at the time of the contract, tenants of the same land, it is often conclusive of the nature and animus of their continued possession; thus serving to explain and define one act of part performance by means of a superadded and corroboratory act. The propriety of admitting this expenditure of money in improvements as a reason for enforcing the contract, is much more clear upon the equitable view of preventing fraud, than is that of admitting the taking and delivery of possession. For in many cases such improvements are carried to that point that they are quite incapable of being compensated in damages.” Browne on Statute of Frauds, sec. 487.

In Mundy v. Joliffe, 5 Mylne & Craig, 167, a tenant who went into possession of premises under a former lease, obtained from his landlord an oral contract for a renewal of his lease for a further term, said contract stipulating, among other things, for the making of certain improvements on the demised premises. The tenant continued in possession, and after the stipulated improvements were made, brought his bill for a specific performance of the contract, and it was held, as a matter about which there could be no doubt, that a sufficient part performance was shown.

In Pfiffner v. S. & St. P. R. R. Co. 23 Minn. 343, it was held, that the making of substantial improvements pursuant to an oral agreement to convey the land improved, by a vendee who was in possession prior to and at the time of the agreement, is such part performance as takes the agreement out of the Statute of Frauds.

In Shillibeer v. Jarvis, 8 DeG., M. & G. 79, the lessee under an oral agreement for a lease was wrongfully and without the authority of the lessor, let into possession, but being in possession, made certain repairs stipulated for in the agreement, and it was held that while the possession, being unauthorized, would not be deemed a part performance, the making of the repairs was sufficient to take the case out of the statute; that if the delivery of possession had been authorized by the lessor, there would have been two acts of part performance.

In Jones v. Tate, 16 Fla. 216, a tenant in possession under a lease entered into an oral agreement with his landlord for a purchase of the demised premises. After making the agreement, he continued in possession and made valuable improvements on the premises, and it was held that the improvements ■constituted a sufficient part performance. See also Ewing v. Gordon, 49 N. H. 344; Wills v. Stradling, 3 Ves. Jr. 381.

We are not disposed to depart from the rule to which this court has heretofore adhered, that to take an oral agreement for an estate in lands out of the Statute of Frauds, there must be both lasting and valuable improvements put upon the land and possession taken under the contract. The only rule we seek to derive from the authorities above cited is one of evidence. It is, that where a party claiming under an oral agreement was in possession under a prior agreement, and continues in possession without interruption, the fact that he has put lasting and valuable improvements upon the premises under and in part performance of the oral agreement may be resorted to as evidence showing or tending to show that his possession, after he became entitled thereto under the oral agreement, is held under that agreement. -

Applying this rule to the present case, we are disposed to hold, that, while, prima fade, the complainants, by remaining •in possession after the expiration of the term to their former lease, assumed the position of tenants holding over, the presumption that they did so is not conclusive, but is subject to be rebutted by evidence tending to a contrary conclusion. Of this character is the evidence of the expenditures made by them by way of improvements under and in performance of their oral agreement. Those expenditures serve to explain and characterize their subsequent holding over after the térrni-nation of their former lease. Presumptions are thereby raised which are sufficiently cogent to overcome the ordinary presumption that a tenant holding over does so under his former lease. It is against all ordinary probability that, after having expended $6000 or over in reliance upon and in performance of the agreement for a lease for five years, they were content to assume the attitude of mere tenants holding over, thus placing themselves in a position where their landlord would be at liberty to terminate their tenancy absolutely at the expiration of the first year, and thus deprive them, without the possibility of adequate recompense, of much the larger part of the benefit to be derived from them expenditures.

But w'e are not without other and direct evidence that their possession, after April 30, 1885, was held, so far at least as any election on their part could make it so, under the agreement for the five year lease. On or shortly after May 1,1885, when presented by Morrison, with the draft of a lease for one year and requested to sign it, they refused to sign on the distinct ground that they were entitled to a lease for five years. This was an assertion of them right to possession under the oral contract, and a repudiation of any other tenancy, and is evidence that, so far as them intention went, the possession was held by them after the expiration of the former lease, under the oral contract. Morrison, according to the testimony of the complainant to whom the draft of the one year lease was presented, admitted that the lease was so drawn by mistake and promised to have it corrected. This admission and promise may be taken as a recognition of the position assumed by the complainants, and as evidence of an assent to their possession in the character in which they claimed to hold it.

But it is insisted that the doctrines above enunciated are not in harmony with the previous decisions of this court. We are referred to Wood v. Thornly, 58 Ill. 464, where it is claimed a different rule is laid down. In that case a father entered into a verbal contract with his two sons, in which he agreed, in consideration of their past services, and for the further consideration, among other things, that they would furnish him a permanent home so long as he should live, to convey to them certain lands. The conveyances were drawn up, but before they were signed, some misunderstanding arose in consequence of which the father refused to execute them or to be bound by the contract. The sons had lived on and worked the land for several years after attaining their majority, and after the refusal of their father to make said conveyances, they continued as before in possession of the land, working it as their own, paying the taxes, and retaining the proceeds for their own benefit, until the death of their father. The evidence failed to show that they were induced by the contract to make any improvements on the land, over and above what were required by ordinary husbandry, and for which they were amply compensated by the rents and profits. In the course of the opinion it was said: “To constitute such performance as will avoid the statute, it must clearly and distinctly appear that the party entered into possession under the agreement itself, and was allowed p,nd induced to make expenditures of money, and to make valuable and permanent improvements. The mere possession of land, under a parol agreement of sale, even with the superadded fact of valuable improvements, will not be deemed part performance, if the possession was obtained otherwise than under the contract.” Specific performance was denied on the ground that the possession was not shown to have been taken under the oral contract. As no improvements appear to have been made, the question did not arise as to whether or how far the making of valuable permanent improvements in pursuance of the contract might have served to explain and give character to the possession, so as to prove that possession was in fact being held under the oral contract, though originally obtained in some other way.

Very much the same thing may be said of Padfield v. Padfield, 92 Ill. 198, where the foregoing language of the opinion in Wood v. Thornly, was cited with approval. That was also •■a case of a contract between father and son, and the evidence, both as to possession and improvements, was substantially the same as in Wood v. Thornly. No improvements being shown, the case was decided on the ground that possession was not shown to have been taken in pursuance of the contract. What was said' in relation to improvements was in no way necessary to the decision of the case.

' In Pickerell v. Morss, 97 Ill. 220, the sole question was whether possession was held under the oral contract, the legal •effect of improvements put upon the land in pursuance of the •contract not being presented. Kaufman v. Cook, 114 Ill. 11, was decided upon the ground that, at the time the possession was taken and the improvements made, the contract relied "upon was one which would not have been binding even if it had been in writing. In none of the foregoing cases was the ■question now before us presented for decision.

The remaining questions in the case will require but few words. It is claimed that Miner, Beal & Co. took their lease-without notice, actual or constructive, of the oral agreement Between Morrison and the complainants, and that they should Therefore be preferred as bona fide purchasers for value. To this claim there seem to be two sufficient answers. In the first place, so long as the complainants must be deemed to have been in actual possession under their oral contract at the time the lease to Miner, Beal & Co. was executed, we see no reason why. such possession should not be deemed constructive or implied notice to them of the complainants’ rights. In the second place, it does not appear that Miner, Beal & Go., at the time they are shown to have received actual notice of the •oral contract with the complainants, had paid any rent or expended any money under the lease to them. The term of their lease did not commence to run until May 1,1886, and the bill in this case had been filed, and Miner, Beal & Co. had entered their appearance in the suit a considerable time prior to that. There is no evidence that Miner, Beal & Co., at the time they were charged with full knowledge of the averments of the bill had paid out a dollar, either by way of rent or otherwise, on. the faith of Morrison’s lease to them.

Nor are we able to see any force in the charge that the complainants were guilty of laches in enforcing their rights. They were in possession and in full enjoyment of their rights under the oral contract, and they were under no legal duty to bring any suit in respect to said rights, at least until they were in some way apprised of the fact that such rights were about to-be threatened or denied. . Very promptly after the complainants discovered that Morrison had repudiated his oral agreement and executed a lease to Miner, Beal & Co., was this suit instituted.

The mere fact that the complainants were content to trust-to Morrison’s oral agreement, however unbusinesslike it may-have been to do so, was not laches. Morrison alone could interpose the Statute of Frauds. The complainants had a right to rely upon his oral promise, and the fact that they did so-furnishes no ground of complaint, either to him or to Miner,. Beal & Co.

After a patient examination of the entire record, and giving an attentive consideration to the various suggestions of counsel, we are of the opinion that the decree of the Circuit Court is sustained by the evidence. The judgment of the Appellate-Court affirming said decree will be affirmed.

Judgment affirmed.