text:
    In Matter of Hinton, et al., Petitioner-Appellant.
    Gen. No. 10,963.
    Second District.
    January 9, 1957.
    Released for publication January 26, 1957.
    Pedderson, Menzimer and Conde, for appellant, Dale F. Conde, of counsel; Wayne R. Bettner, for respondents-appellees, L. R. Jeanblane, of counsel.
   Opinion by

PRESIDING JUSTICE DOVE.

Not to be published in full.


source: Caselaw Access Project

author: JUSTICE CROW.

license: Public Domain

text:
    Naomi Lovekin, Administrator of the Estate of George D. Lovekin, Deceased, et al., Plaintiffs-Appellees, v. Francis P. Loser and Robert N. Halter, d/b/a Loser’s Tavern, also known as Bob and Whitey’s, et al., Defendants-Appellees. Anthony Howaniec, d/b/a Hi-Lite 30 Drive-In Theatre, Petitioner-Appellant.
    Gen. No. 10,959.
    Second District.
    January 9, 1957.
    Released for publication January 26, 1957.
    Posner, Dunning & Marquard, for appellant, Henry J. Marquard, of counsel; O’Brien, Burnell & Puckett, for Ray J. Myers, Francis M. Eby, and Raymond W. Schwartz, d/b/a O. K. Grill; Certain Appellees, Donald L. Puckett and Joseph H. Barnett, of counsel.
   Opinion by

JUSTICE CROW.

Not to be published in full.


author: JUSTICE EOYALDI

text:
    In re Estate of Francis L. Brown, Deceased. MacFarlane L. Brown, Petitioner-Appellant, v. Ruth Schwanke, Executor under the Will of Margaret A. Brown, Deceased, Respondent-Appellee.
    Gen. No. 10,945.
    Second District.
    January 9, 1957.
    Released for publication January 26, 1957.
    Nat M. Kahn, and David J. A. Hayes, for MacFarlane L. Brown, petitioner-appellant; Hyer, Gill & Brown, for Ruth Schwanke, respondent-appellee.
   JUSTICE EOYALDI

delivered the opinion of the court. Not to be published in fuU.


author: JUDGE BURKE

text:
    John Carr, Plaintiff, v. James Edwards, and Checker Taxi Company, Defendants. Checker Taxi Company, Counterplaintiff-Appellee, v. James Edwards, Counterdefendant-Appellant.
    Gen. No. 46,906.
    First District, First Division.
    November 19, 1956.
    Released for publication February 11, 1957.
    Laff & Tuber, of Chicago, for eounterdefendantappellant.
    Jesmer and Harris, of Chicago, for counterplaintiffappellee.
   JUDGE BURKE

delivered the opinion of the court.

On December 9,1954, John Carr filed a statement of claim in the Municipal Court of Chicago against James Edwards and Checker Taxi Company for damages caused to his premises by_ the alleged negligent operation of the automobile of defendants. The corporate defendant was served with a summons. The bailiff made a return that he was unable to find Edwards. On January 6, 1955, the corporate defendant filed an answer and a counterclaim. The answer denied that it was guilty of any act of negligence. The counterclaim averred that by reason of the negligence of Edwards, counterdefendant, in the operation of his automobile, the automobile of counterplaintiff was damaged and it demanded judgment against Edwards for $200.

On August 28, 1955, an alias summons was served on Edwards. This summons required the defendant to answer the statement of claim of the plaintiff. A copy of the statement of claim was attached to the summons. On September 13, 1955, a default for want of an appearance was entered against Edwards. The latter did not file an appearance or an answer. On October 19, 1955, the court entered judgment for the plaintiff and against Edwards for $355.30 and for the corporation and against Edwards on the counterclaim for $200. Plaintiff’s claim against the corporation was dismissed. In due time the defendant filed a petition supported by an affidavit to vacate the judgment on the counterclaim. The affidavit stated that Edwards had no notice of the filing of the counterclaim until after the entry of judgment. The court denied the motion to vacate the judgment. Edwards appeals from the judgment rendered against him on the counterclaim and the order denying his motion to vacate. He does not complain of the judgment in favor of the plaintiff.

Appellant asserts that the court erred in refusing to vacate the judgment in favor of the corporation without the service of any notice upon him of the filing of the counterclaim. The appellee insists that the judgment on the counterclaim was properly entered. It places reliance on Rule 33 of the Municipal Court of Chicago in force in 1955 reading: “(1) Any demand by one or more defendants against one or more plaintiffs, or against one or more co-defendants, whether in the nature of setoff or recoupment, and whether in tort or contract, for liquidated or unliquidated damages, may be pleaded as a cross-demand in any action, and when so pleaded shall be called a counterclaim. (2) The counterclaim shall be a part of the answer, and shall be designated as a counterclaim.” Appellee states that the rules required that a counterclaim be filed as a part of the answer, that Edwards was duly served with summons, that when he chose not to defend the litigation he defaulted on the state of the record at the time of service of summons, and that consequently the judgment should not be disturbed.

Edwards calls attention to Rule 28 of the Municipal Court of Chicago in force in 1955 providing that except in case of defaults, the prayer for relief shall not be deemed to limit the relief obtainable, and to a similar provision in the Civil Practice Act. In support of his position that on a default the relief granted cannot exceed the specific prayer of the complaint, appellant cites Kryl v. Zelezny, 290 Ill. App. 599; Western Smelting & Refining Co. v. Benjamin Harris & Co., 302 Ill. App. 535; and Oetting v. Graham, 373 Ill. 247.

The provision of Rule 33 of the Municipal Court of Chicago that any demand by a defendant against a co-defendant, may be pleaded as a cross-demand in any action, does not exclude the elemental requirement of notice of the filing of a counterclaim to a co-defendant who has defaulted. It will be observed that a rule requires that a true copy of the statement of claim shall be served on each defendant with the summons. The cases cited by the appellant hold that on default the relief granted cannot exceed the specific prayer of the statement of claim. In our opinion it would be unreasonable to expect a defendant who had defaulted to anticipate that a co-defendant would file a counterclaim against him. The principle announced in the cases above cited is applicable to the facts of the instant case.

We do not find any rule specifically requiring that a co-defendant be given notice of the filing of a counterclaim against him and that he be required to answer or otherwise plead thereto. We feel nevertheless that the rules intend that a co-defendant who becomes a cross-defendant and is in default in the case in chief should have notice of the pendency of the counterclaim and that this is required by elemental justice.

We are of the opinion that the appellant should be given an opportunity to present whatever defense he may have. Therefore, the order of the Municipal Court of Chicago refusing to vacate the judgment on the counterclaim is reversed and the cause is remanded with directions to sustain the motion to vacate the judgment and for further proceedings in due course.

Order reversed and cause remanded with directions.

NIEMEYER, P. J. and FRIEND, J., concur.


text:
    E. Thomas McBreen, et al., Appellees, v. Iceco, Inc., and Clemens J. Tafel, Appellant.
    Gen. Nos. 46,629, 46,951.
    First District, First Division.
    November 19, 1956.
    Released for publication February 11, 1957.

      Winston, Strawn, Black & Towner, of Chicago, for Clemens J. Tafel, appellant; Edward J. Wendrow, Alexander J. Moody, and Thomas A. Reynolds, Jr., all of Chicago, of counsel.
    Powers and Boyd, of Chicago, for appellees.
   JUDGE BURKE

delivered the opinion of the court.

On July 24, 1953, twelve plaintiffs filed a complaint under the Illinois Securities Law of 1919 against Iceco, Inc., an Illinois corporation, and Clemens J. Tafel and prayed that judgment be entered for each plaintiff for the amount paid for the stock of the corporation and attorneys’ fees in the action. On October 28, 1953, a judgment aggregating $92,500, including $8,500 attorneys’ fees, was entered in favor of the twelve plaintiffs and against the corporation in default of an answer. There was no appeal from this judgment. On February 11, 1954, an amended complaint was filed against Tafel. On October 22, 1954, a similar judgment was entered against Tafel on the amended complaint and his third amended answer. On November 17, 1954, the court denied defendant’s motion to vacate the judgment and for leave to file his tendered answer instanter. Tafel, hereinafter called the defendant, appeals from the judgment and the order denying his motion to vacate the judgment. Subsequent to the filing of the briefs the defendant moved to reverse the judgment. From the suggestions and counter suggestions accompanying the motion it appears that on June 10, 1954, plaintiffs, as petitioning creditors, filed an involuntary petition under Chapter X of the Bankruptcy Act against the corporation in the United States District Court for the Northern District of Illinois, Eastern Division. The petition stated that plaintiffs were creditors of the corporation in the amount of $92,500 by virtue of the default judgment. The petition was subsequently approved as filed in good faith and an order was entered retaining the debtor-in-possession of its properties and business. By authority of an order entered on September 8, 1954, a trustee operated and managed the affairs of the corporation from September 13,1954 to and including June 30, 1955. A proposed plan of reorganization submitted by the trustee was approved by a sufficient proportion of the stockholders and creditors. Three of the plaintiffs did not sign acceptances of the plan. Each of the remaining nine filed an acceptance “without prejudice” to his rights as against Clemens J. Tafel in the then pending case.

On June 20, 1955, the District Court entered an order confirming the trustee’s plan. The order directed the judgment creditors (plaintiffs) to turn over to the trustee each and every certificate of stock of the debtor upon which their judgments were based and instructed the trustee to cancel the certificates upon consummation of the plan and directed the trustee to cause to be issued to the judgment creditors promissory notes of the reorganized company. Pursuant to the order of the District Court the plaintiffs turned over to the trustee all of their stock in the corporation, and pursuant to the plan of the reorganization the trustee canceled the stock certificates and issued to plaintiffs $92,500 of promissory notes of the reorganized company, known as Schwartz Carbonic Company. Defendant urges that plaintiffs have no lawful right to collect on their judgment against him because they are no longer able to turn over to him the stock originally sold to them, but only promissory notes of a reorganized company; that the fact that the common stock was found to be worthless in the reorganization proceedings does not excuse plaintiffs from making a valid tender; that even if it be assumed that the alleged worthlessness of the common stock would excuse its tender, the preferred stock was not worthless and can no longer be tendered; that the contract must be rescinded in toto and cannot be rescinded in part; and that plaintiffs by accepting promissory notes in the reorganized company in exchange for their judgment against it and surrendering the common and preferred stock which formed the basis of the default judgment against it, have elected to collect and have collected their judgment from the corporation and cannot now collect their judgment against defendant because in legal effect it has also been satisfied.

Plaintiffs brought their action under Section 37 (1) of the Illinois Securities Act of 1919 [Ill. Rev. Stats. 1953, ch. 121%, §132, subd. (1)], which provides :

“Every sale and contract of sale made in violation of any of the provisions of this Act shall be void at the election of the purchaser and the seller of the securities so sold, the officers and directors of the seller, and each and every solicitor, agent or broker of or for such seller who shall have knowingly performed any act or in any way furthered such sale, shall be jointly and severally liable in an action at law or in equity, upon tender to the seller or in court of the securities sold to the purchaser for the amount paid together with his reasonable attorney’s fees in any action brought for such recovery.”

It will be observed that this statute conditions liability upon tender to the seller or in court of the securities sold. In the instant case the seller is the corporation. The liability of the defendant is predicated on his position as an officer and director of the corporation. There is no requirement that there be a tender to the defendant. The tender had theretofore been made to the corporation. After the tender to the corporation, as disclosed in the complaint, the plaintiffs had the right to do any acts with respect to the stock certificates reasonably necessary to protect their interests. The issue as to tender should be made up and decided with the entry of the judgment. In our opinion it was unnecessary to tender the stock to the defendant. It had theretofore been tendered to the corporation. What plaintiffs did with the stock was all to the advantage and best interest of the defendant. Plaintiffs now hold notes of the reorganized corporation. Should there be a judgment against the defendant, he will receive credit for whatever amount plaintiffs receive in payment of the notes. Therefore, the motion of the defendant to reverse the judgment on account of the occurrences after the entry of the judgment is denied. Because of an inquiry by the court during the oral argument of the case, the defendant filed a petition in the Circuit Court in the nature of a writ of audita querela to vacate the judgment or in the alternative for a permanent stay of execution. The motion was based on the facts above recited. The court denied the motion. The defendant appealed from that order. That appeal was consolidated with the first appeal. The judgment of the Circuit Court in the second appeal (46951) is affirmed.

We turn to a consideration of the points urged in the appeal from the judgment for $92,500 entered on October 22, 1954. The defendant insists that the amended complaint fails to allege causes of action and cannot support the judgment because it does not allege that the sales of stock were made to plaintiffs in this state. There is no right of action under the statute unless the sale complained of took place in Illinois. People v. Hill Top Metals Min. Co., 300 Ill. 564; People v. J. O. Beekman & Co., 347 Ill. 92, 97; Mayer v. Rankin, 91 Utah 193, 63 P.2d 611. See also Los Angeles Fisheries, Inc. v. Crook, 47 F.2d 1031; Brocalsa Chemical Co. v. Langsenkamp, 32 F.2d 725; Robbins v. Pacific Eastern Corp., 8 Cal.2d 241, 65 P.2d 42; In re Suckow’s Estate, 192 Wis. 124, 212 N. W. 280. In Fletcher, Cyclopedia Corporations (1945 Rev. Vol.) Sec. 6742, the author states:

“The law which governs is the law of the place where the contract of sale was made, as in other cases involving the validity of contracts in general for the purchase and sale of stocks, i. e., the law of the state where occurred the last act necessary to make the contract complete . . . Such laws have no extraterritorial effect. They have no application to the issuance of stock in another state.”

The amended complaint does not allege that any of the sales took place in Illinois. Defendant’s answer does not allege that any of the sales occurred outside of this state. The tendered fourth amended answer alleged that all of the sales to six of the plaintiffs took place in New Mexico. Plaintiffs maintain that their complaint is within the language of the Illinois Securities Act and that the fact that the sales of stock may have occurred outside of the state is for the defendant to plead by way of a defense. In discussing the case of Mayer v. Rankin, supra, cited by defendant, plaintiffs point out that the securities statute of Utah contains an express provision that no security except of an exempt class or exempt transaction shall be sold within the state of Utah unless such securities shall have been registered. Plaintiffs point out that unlike the Illinois statute the Utah law provides that no security except of a certain class “shall be sold within this state.” It has been uniformly held that the law which governs the sale of securities is the law of the place where the contract of sale was made. The statute, the provisions of which the defendant is charged with violating, is an Illinois securities law. Our Illinois courts hold that it does not have extraterritorial application. In our opinion the rule laid down in the Utah case is applicable to the facts presented by the pleadings before us.

Plaintiffs assert that the complaint adequately infers that the sale of the securities came within the statute. They say that if it should be considered that the defendant should have been apprised of the fact that the sales occurred within the state, then it is their position that the amended complaint does so apprise the defendant. They state that the action is brought under the Illinois securities law which gives rise to the inference that the sales are within that law. They call attention to the allegation that the corporation’s plant is located in New Mexico while its principal office is in Chicago. We cannot agree with thé plaintiffs that there is any allegation in the amended complaint to the effect that the sales occurred in Illinois. The allegation that plaintiffs’ principal office was in Chicago cannot be construed as an allegation that the sales occurred in Illinois.

A complaint under the Illinois Securities Act which fails to allege ultimate facts showing that the sale complained of occurred in this state does not allege a cause of action. In Lasko v. Meier, 394 Ill. 71, the court said (at page 75):

“If, with all intendments in its favor, a complaint wholly and absolutely fails to state any cause of action at all, objection can be made to it for the first time on appeal. But, on the other hand, if the complaint states a cause of action, no matter how defectively or imperfectly alleged, and the same is not challenged below, then such defectively stated cause of action is cured by verdict and cannot be questioned on appeal. ... A cause of action consists of a right belonging to the plaintiff and some wrongful act or omission done by tbe defendant by which that right has been violated and a grievance suffered therefrom by the plaintiff for which the law gives him a right to sue. A cause of action includes every fact necessary for the plaintiff to prove to entitle him to succeed, and every fact which the defendant would have a right to traverse.”

After trial and verdict a court of review will do its utmost to construe a pleading as effectively alleging a good cause of action rather than failing to allege a cause of action. Where the plaintiff obtained a judgment on the pleading, the reason for the foregoing rule does not exist. In the instant case the amended complaint cannot be aided by verdict because there was no trial. Section 45 (4) of the Civil Practice Act [Ill. Rev. Stats. 1953, ch. 110, § 169, subd. (4) ] provides that upon motions based on defects in pleadings, substantial defects in prior proceedings may be considered in so far as they are material to the ruling sought. Our Supreme Court spoke on this subject in Parrino v. Landon, 8 Ill.2d 468. This case emphasizes the trend to uphold a judgment after verdict where a substantial allegation is lacking in the complaint. We do not feel that the Supreme Court intended to change the rule heretofore applicable in judgments on pleadings where a substantial allegation was lacking in the complaint. In the instant case the amended declaration fails to make an essential averment. The plaintiffs are not in a position to say that material defect in their complaint was cured by verdict or finding of the court following a trial. For that reason the judgment should be reversed.

The defendant asserts that his third amended answer raises issues of fact as to whether the stock which plaintiffs purchased was in Class D or Class B and that the court erred in entering judgment on the pleadings. Subparagraph 2 of Section 37 of the Securities Act in effect at the time provides that in any action where the seller or issuer relies for his defense upon any of the exemptions provided for in the Act, the burden of proof to establish the exemption shall be upon such issuer or seller. In People v. Wilson, 375 Ill. 506, the court states that this is a legislative pronouncement and that the burden was on the defendant to show that the securities were sold to the complaining witness under such circumstances as to bring the sale within one of the exemptions specified in Section 5 [Ill. Rev. Stats. 1939, ch. 121%, § 100] thereby making the security of Class B and exempt from registration. In that case the court said that the burden was on the defendant to prove that the sale was in good faith, with no intent to defraud and that the sale was not either directly or indirectly for the benefit of the corporation, nor for the direct or indirect promotion of any scheme or enterprise of the company. We are of the opinion that in his third amended answer the defendant failed to allege ultimate facts which qualify the sales of stock to the plaintiffs as exempt sales under Class B and that the trial judge was right in so holding.

The judgment of the Circuit Court of Cook County in case 46,629 entered October 22,1954, is reversed and the cause is remanded with directions for further proceedings consistent with these views.

Judgment in case 46,629 reversed and cause remanded with directions and judgment in case 46,951 affirmed.

NIEMEYER, P. J. and FRIEND, J., concur.


text:
    David Rosenheim, and Mary M. Abbe, et al., Plaintiffs, First Securities Company of Chicago, New York Blower Company, Intervening Petitioners-Appellees, v. City of Chicago, et al., Defendants. Board of Education of City of Chicago, Defendant-Appellant.
    Gen. No. 46,895.
    First District, First Division.
    November 19, 1956.
    Released for publication February 11, 1957.
    Frank R. Schneberger, of Chicago, for appellant; Frank S. Righeimer, James W. Coffey, and John T. Mehigan, all of Chicago, of counsel.
    Fred L. Steers, of Chicago, for appellee.

      Dale, Haffner & Grow, of Chicago, for First Securities Company of Chicago, intervening petitionerappellee; John M. Wejman, of Chicago, of counsel.
   JUDGE BURKE

delivered the opinion of the court.

In 1931 the Board of Education of the City of Chicago had no money in its treasury to pay its teachers, employees and creditors. This situation was due to the general economic depression and to the fact that a general property reassessment for tax purposes was pending in Cook County as a result of which no taxes for the years 1928 through 1931 were being extended or collected. In an effort to provide a method of paying accrued salaries of teachers and employees and accrued accounts of other creditors, the Board on June 29,1931 adopted a resolution which recited that it had no moneys to pay such past due obligations, and provided for the deposit of 1931 tax anticipation warrants with the Secretary of the Board, as Trustee, to be held as security for the payment of instruments designated “Participation Certificates” proposed to be issued to employees and creditors of the Board. Such certificates were to be in the form of general obligations of the Board and to bear 6 per cent interest until paid. As such purported obligations they were to be payable from any funds of the Board and were secured by 1931 tax anticipation warrants deposited for their payment. In accordance with the resolution the Board issued a large amount of such “Participation Certificates” or “Scrip” as they were commonly known.

On September 8, 1931, a complaint was filed in behalf of taxpayers and teachers for a decree declaring that the participation certificates theretofore issued were void, and for an injunction against further issuance and redemption. On October 16; 1931, following a hearing on an application for a temporary injunction, the chancellor stated that in his opinion the Board did not have authority to issue participation certificates and directed the attorneys for the plaintiffs to prepare and present an order for a temporary writ of injunction. The record does not show whether a temporary injunction was issued. The Board accepted the views of the chancellor and ceased to issue participation certificates. In 1932 orders were entered decreeing that the 1931 tax warrants deposited as collateral security for the participation certificates were void and ordered them canceled, which orders were complied with by the Board. The 1932 orders further decreed that the Board be authorized and empowered to issue 1931 tax anticipation warrants in small denominations to redeem outstanding and unpaid participation certificates issued to creditors, and that the tax anticipation warrants so authorized to be issued be exchanged for the principal amount of the participation certificates, the question of interest claimed to be due holders of such certificates to await the further order of the court. The principal amounts of the participation certificates represented the original principal indebtedness from the Board to its teachers and creditors.

The holders of the participation certificates exchanged them for an equal amount of 1931 tax warrants bearing interest at 6 per cent from the date of the issuance of the tax warrants. These tax warrants and all other Board of Education tax anticipation warrants received in exchange for the participation certificates were paid in full with interest from the proceeds of the 1931 tax collections. On May 3, 1937, the New York Blower Company filed its intervening petition. On July 24, 1942, the predecessor of the First Securities Company of Chicago filed its intervening petition. On March 1,1954, the intervenors filed amendments to their petitions, praying for money judgments against the Board, based on claims for interest on their participation certificates from the date of their issuance to the date they were exchanged for 1931 tax warrants. The intervenors have been paid the entire amount of the original principal indebtedness due them from the Board, plus interest as accrued on the 1931 tax warrants they received in exchange for their participation certificates. The Board filed answers denying that intervenors were entitled to interest on their participation certificates and stated that the Board lacked authority to issue participation certificates or to create an obligation thereunder to pay interest; that the instruments were illegal and void and that no interest could be recovered thereon; that intervenors’ long inaction constituted an abandonment of their claims; that intervenors were guilty of laches; and that the orders and rulings in the case are res judicata of the question of interest thereon. Following a hearing the chancellor on November 22, 1955, entered a decretal judgment in favor of the First Securities Company of Chicago against the Board for $4,538.57 and in favor of the New York Blower Company for $4,213.90, payable out of the 1931 tax collections as claimed interest at 6 per cent per annum on the participation certificates from the dates of their issuance in 1931 to the various dates they were exchanged for 1931 tax anticipation warrants. The Board appeals.

The Board of Education is a body politic and corporate, created to carry out certain governmental functions in connection with the education of children of the school district of Chicago, and has only such powers as are expressly conferred upon it by the Legislature or such as may be necessary to carry into effect granted powers. Neither in 1931, nor at any time since, did the Board have statutory authority which would authorize it to issue interest bearing “Participation Certificates.” Such an instrument is not mentioned in the statutes. The attempt to do so in 1931 was without authority of law and the certificates issued were void and no interest can he recovered thereon. In Hewitt v. Board of Education of Normal School Dist., 94 Ill. 528, the court said (at page 532):

“Where a corporation is created for business purposes, all persons may presume such bodies, when issuing their paper, are acting within the scope of their power. Not so with municipalities. Being created for governmental purposes, the borrowing of money, the purchase of property on time, and the giving of commercial paper, are not inherent, or even powers usually conferred; and unless endowed with such power in their charters, they have no authority to make and place on the market such paper, and persons dealing in it must see that the power exists. This has long been the rule of this court.”

See also People v. Johnson, 100 Ill. 537; Law v. People ex rel. Huck, 87 Ill. 385; Newell v. School Directors of Dist. No. 1, T. 30 N., R. 3 E., 68 Ill. 514; Loeb v. Board of Education of Chicago, 203 F.2d 775; Greenlee v. Beaver, 334 Ill. App. 572.

The intervenors call attention to the 1931 statute governing the Board providing that the specifications of the powers granted are not to he construed as exclusive, hut the Board shall exercise all powers that may he requisite or proper for the maintenance and the full development of an efficient public school system, not inconsistent with those general provisions of the school law of the state which apply to all districts. They say that the statute does not limit the powers of the Board, hut, on the contrary, it is expansive in the grant of power, curbed only by inconsistent general provisions of the school law, and that there is no provision which prohibits the Board from contracting to pay interest. The intervenors insist that the Legislature meant that the Board should have broad powers and that there is nothing improper about the payment of interest. They point out that the Board in its business affairs is in competition with private business and must have powers which permit it to operate when funds are needed. They concede that there is no statute expressly stating that the Board is empowered to pay interest but that there are references in the statutes which recognize that the Board has such power.

A careful consideration of the pertinent statutes convinces us that the Board in 1931 had no power or authority to issue general obligation interest-bearing commercial paper such as participation certificates as a mode of making provision for the payment of its obligations when there was not sufficient money in its treasury to meet its ordinary and necessary expenses. The only authority given the Board in such a situation was to issue tax anticipation warrants. When the Legislature provided this limited power, it by implication prohibited the doing of anything inconsistent therewith. The Legislature limited the power to the issuance of tax anticipation warrants, payable solely from the taxes against which they were drawn, thus protecting the taxpayer by limiting the liability the Board might incur to the outstanding taxes. The obvious intent of the Legislature was to make it impossible to foist unlimited liability on the taxpayer. We do not think that the 1931 statute which refers to interest on temporary loans supports the position of the intervenors. The temporary loans mentioned are inter-fund loans such as loans authorized by the Board from its educational fund to its building fund. Participation certificates are neither bonds nor tax anticipation warrants nor temporary loans. There was no “temporary loan” in the case at bar, in fact, there was no loan between the Board and the intervenors. The participation certificates cannot be viewed as a temporary loan. There was no borrowing but simply an attempt to make payment of an existing debt by paper which the Board was without power to issue.

The intervenors contend that a municipal corporation is liable for interest on its obligations when it expressly agrees to pay interest. There was no agreement made to pay interest at the time the teachers were employed, materials purchased and the debt incurred. It was not until some time after the debt accrued that the Board attempted to pay interest on the indebtedness through the issuance of interest-bearing participation certificates, despite the fact that there was no authority under the law to issue such commercial paper. We have held that the participation certificates were void. The provision for interest is also void and no recovery can be had upon it. To enforce the claim of the interest would be to circumvent the illegality of the participation certificates. The intervenors cite cases holding that a municipal corporation can by express contract bind itself to pay interest. These cases also hold that the liability for interest must be provided for by contract lawfully made. In the case at bar the Board, in contracting the original indebtedness for salaries of teachers and for materials and services to be rendered by contractors, did not agree to pay interest. It was only in the participation certificates subsequently issued that the Board for the first time agreed to pay interest. The Board has been authorized to pay interest on tax anticipation warrants and bonds issued by it, but no authority exists for the issuance of participation certificates or to contract to pay interest thereon. The intervenors urge that the court has decided that the participation certificates issued by the Board in 1931 were not void, referring to the orders entered in 1932 declaring the warrants void, ordering them canceled and giving the holders of the participation certificates the right to exchange them at full face value for the new 1931 interest-hearing tax anticipation warrants. To obtain the new warrants a holder was required to surrender his certificate. The new warrants and the old certificates contained the same rate of interest. The intervenors insist that the import of the 1932 orders was to establish the participation certificates as valid obligations of the Board as to their special amount.

The intervenors state that the 1932 orders adjudicated the validity of the participation certificates, that the orders then entered are res judicata and that the Board may not relitigate the issues thus settled. In our opinion this contention is without merit. If the court in 1932 had adjudicated the participation certificates to be valid, it would have dismissed the amended complaint for want of equity. If the chancellor construed the participation certificates to be valid there would have been no purpose in ordering that the Board issue tax anticipation warrants in’small denominations to be exchanged for the principal amount only of the participation certificates. We find that by the agreed orders entered in 1932 the chancellor did not change his opinion that the Board lacked power and authority to issue participation certificates. Since under the statute the Board had express authority to issue tax anticipation warrants as a means of discharging the original debt for services previously rendered and materials furnished, the court provided in its order that the tax anticipation warrants should be issued in the principal amounts only of the participation certificates. These amounts evidenced the original principal indebtedness due from the Board to its teachers and creditors. For the convenience of all parties the chancellor permitted the use of the participation certificates as evidence of the amount of the original debt in determining the amount of tax anticipation warrants to be received and the exchange was manifestly for that purpose. We conclude that there is no merit to the intervenors’ contention that the validity of the participation certificates was determined in the orders entered in 1932. The only time the chancellor determined that the participation certificates were valid was when he entered the decree from which the instant appeal is prosecuted.

It is unnecessary to consider the contention of the Board that the intervenors are guilty of laches. For the reasons stated the decretal judgment of the Circuit Court of Cook County is reversed and the cause is remanded with directions to enter a decree dismissing the petitions of the intervenors for want of equity.

Decretal judgment reversed and cause remanded with directions.

NIEMEYER, P. J. and FRIEND, J., concur.


author: JUDGE FRIEND BURKE, J.,

text:
    J. Edward Jones, Appellant, v. Jenny Kilfether, and Evelyn S. Jones, Appellees.
    Gen. No. 46,909.
    First District, First Division.
    November 19, 1956.
    Released for publication February 11, 1957.

      J. Edward Jones, of River Forest, pro se, appellant.
    No brief filed for appellee.
   JUDGE FRIEND

delivered tbe opinion of tbe court.

Plaintiff J. Edward Jones and bis wife Evelyn, together with tbeir two minor children, live at 1426 North Monroe avenue, River Forest, Illinois. Mrs. Jones and her brother inherited adjacent properties at 1426 and 1430 North Monroe avenue from their mother and own both these properties as tenants in common. As between Mrs. Jones and her brother, she has had exclusive control of the premises in which she resides with plaintiff and their children, and the brother has had exclusive control of the adjoining property.

In September 1955 Mrs. Jones invited one Miss Jenny Kilfether to live in their home as a guest. She is not related to Mrs. Jones, nor does she pay rent. She came to live in the Jones home over plaintiff’s objection. Plaintiff asked his wife to request Miss Kilfether to move out, but Mrs. Jones refused to do so. Thereupon plaintiff, on October 1, 1955, addressed and delivered the following letter to Miss Kilfether, demanding that she find living quarters elsewhere:

“Some time ago you moved into our home without having made any arrangements with me nor had anyone else made any such arrangements for you to move in. I am now informed by my wife that you plan to stay indefinitely in our home on some basis I have not been able to find out.
“At the time you moved in my wife had filed a suit against me for divorce (which I suppose you knew nothing about). The law gives a period of 60 days for husbands and wives to try to get together in such cases. During the period of this litigation I regret to say that I do not think it is proper for strangers to be living in the home of the parties.
“I therefore respectfully request and demand that you find living quarters elsewhere. I am opposing the suit for divorce by my wife and as far as I know have given her no ground for such action.
“Please advise me as to your action on this request.”

Miss Kilfether refused to leave the premises, and plaintiff brought forcible entry and detainer proceedings against her, claiming the right of possession of the premises she is occupying. The complaint, after reciting the salient facts with respect to ownership of the property, alleges that “plaintiff is entitled to the possession of the said premises . . . and to that portion thereof occupied by the defendant [Jenny Kilfether] and she unlawfully withholds said possession from the said plaintiff”; and the plaintiff also asserts that, by virtue of the ownership of the residence by Mrs. Jones and her brother as tenants in common, plaintiff has an estate of homestead therein.

A motion made by defendant Jenny Kilfether to dismiss the complaint was overruled, and the case proceeded to trial. During the hearing Miss Kilfether was represented by Mrs. Jones’s counsel but was not herself present; Mrs. Jones testified as a witness for plaintiff under section 60; her brother testified for plaintiff; and Mr. Jones testified in his own behalf. Pursuant to trial, the court found for defendant and entered judgment accordingly. Plaintiff appeals.

He takes the position that he has the right to actual possession of the property under the common-law right of possession of the family residence while living with his family therein, even though he has no title to the property, and also by reason of the fact that he has a homestead in the premises. The case involves the novel question whether a stranger moving into the family residence of plaintiff, his wife and children, against his wishes but at the invitation of his wife who has title to the premises, constitutes a forcible entry as to plaintiff; and also whether the refusal of Miss Kilfether to move out after the request made by plaintiff constitutes a forcible detainer of the premises. Plaintiff cites no decisions involving similar facts, and we have been unable to find any. Cases dealing with the question of the right to possession of premises under the Forcible Entry and Detainer Act (Ill. Rev. Stat. 1955, eh. 57) involve plaintiff’s title or interest or the nature of his estate in the premises by virtue of a fee simple, a freehold, a leasehold, or as a tenant at will, or other facts fairly implying ownership of the property. 36 C.J.S. Forcible Entry and Detainer § 40 b. The right to possession is generally defined as legal possession. We find no authority holding that, where the title to the premises is in the wife, the husband as head of the household is entitled to possession of a part of the premises occupied by a guest invited to live in the home by the wife who owns the property.

The husband has no longer control and management of the separate property of his wife. She may deal with it as she sees fit. Spalding v. Spalding, 361 Ill. 387, 393; Ill. Rev. Stat. 1955, ch. 68, sec. 9. She is under no obligation to furnish her husband with a home, even though she has one and he has not. 26 Am. Jur., Husband and Wife, § 341, citing Lear v. Lear, 234 Ky. 369, 28 S.W.2d 32, and Walker v. Walker, 215 Ky. 154, 284 S. W. 1042. In Southworth v. Edmands, 152 Mass. 203, 25 N. E. 106, the right to tax the property of the wife occupied as a family home against the husband as a party in possession, was involved. In sustaining taxation against the husband, the court said (p. 206) : “It appears that Edmands and his wife occupied the premises, and with their minor children resided on the place. There is nothing to show that he, as the head of the family, was not in possession of the family home. The fact that the wife owned the place would not afford an inference that she had taken her husband’s place in the family. Undoubtedly she would have the right to take and retain possession, even if it were necessary therefor to compel her husband to furnish another home for her. But if she permitted her estate to be occupied as the family home, the presumption, in the absence of evidence to the contrary, is that she permitted the possession of it to he in her husband. Her consent that her husband should be in possession would be presumed. He would not be her tenant, but would be in by her license. Plaisted v. Hair, 150 Mass. 275. He was under legal obligation to provide a home for his family. She was under no legal obligation to allow him to use her estate for that purpose. She might have refused it to him; perhaps she might, as a condition of admitting him to it, have exacted his consent that she should be the master of the house.” The court refused to follow Hamilton v. Fond du Lac, etc., 25 Wis. 496, where a similar question, the right to tax a husband as the occupant of his wife’s premises, was involved, and where the Wisconsin court said: “We infer, therefore, that the plaintiff [husband] probably lived on them [the lots] with her, they being her separate property. But we have held in such a case, nothing further being-shown, that the possession is the possession of the wife, and not of the husband. . . . The husband, merely residing with his wife upon her separate property, is no more the occupant of the property, within the meaning of the statute allowing lands to be assessed to occupants, than she would be of his lands if residing with him thereon. The statute meant, by the word ‘occupant,’ one who occupied the property in his or her own right, as tenant or otherwise, and in the absence of a possession by the real owner.”

In the instant case there is no agreement between plaintiff and his wife as to the occupancy of the premises as a family home. There is nothing to establish the relation of landlord and tenant. Hnder the cases cited, plaintiff’s possession, if any, is that of a mere licensee, terminable at the will of the wife. As such licensee he cannot determine, over the objection of his wife, who shall be a member of the household. To hold otherwise would nullify the statute and would permit him to exclude from the family home owned by his wife her immediate relatives, who might be dependent on her. If he wishes to exercise the prerogatives of the head of the family his only recourse is to establish a suitable family home elsewhere.

Nor do the undisputed facts support plaintiff’s claim to a homestead in the premises. He admits title to the property in Mrs. Jones and her brother as tenants in common. In Johnson v. Muntz, 364 Ill. 482, cited in De Martini v. De Martini, 385 Ill. 128, the Supreme Court of this state held that if the husband is living and residing with his wife on premises owned by them, either as joint tenants or tenants in common, the homestead estate is vested in the husband alone, it being the right of occupancy and not the estate of homestead which is jointly vested in the husband and wife. In the De Martini case the court said: “The right of homestead being by our present statute enlarged into an estate, it follows that like all other estates, it can have no separate existence apart from the title on which it depends. We have held that the estate of homestead created by the statute is based upon the title of the householder, and can have no separate existence independently of the title, which constitutes one of its essential elements, and from which it is inseparable. (Kitterlin v. Milwaukee Mechanic’s Ins. Co., 134 Ill. 647; Browning v. Harris, 99 Ill. 456; Tink v. Walker, 148 Ill. 234.) In none of the cases holding that the husband, as head of the family, is the householder contemplated by the statute in whom the homestead vests, does it appear that the husband owned no interest in the title.”

Plaintiff’s principal claim to the right of possession of the property owned by his wife as a tenant in common with her brother is predicated upon his claimed right of homestead; but since, under the rule heretofore enunciated, the right of homestead can have no separate existence independently of the title which constitutes one of its essential elements and from which it is inseparable, he has no right of homestead and therefore no right to possession of the property on that basis.

For the reasons indicated, the judgment of the County Court is affirmed.

Judgment affirmed.

NIEMEYER, P. J., concurs.

BURKE, J.,

dissenting.

A forcible detainer action does not present a question of title. The question at issue is the right to possession of the premises. Plaintiff, as the head of his family, was in peaceable possession of the premises. This peaceable possession was invaded by Miss Kilfether. Furthermore, there was an unlawful detention by her when she refused to vacate after demand. I am of the opinion that the judgment should be reversed and the cause remanded with directions to enter judgment for possession of the premises in favor of the plaintiff and against Jenny Kilfether.


author: JUDGE FRIEND

text:
    People of State of Illinois ex rel. James K. Wiechern, Appellee, v. Richard Smykal, Acting Commissioner of Department of Buildings, City of Chicago; Stephen E. Hurley, President, Albert W. Williams, and John J. Ahern, Members of and Constituting Civil Service Commission of City of Chicago; James H. Dillard, Comptroller of City of Chicago; and David L. Hartigan, Acting Treasurer of City of Chicago, Appellants.
    Gen. No. 46,867.
    First District, First Division.
    November 19, 1956.
    Released for publication February 11, 1957.

      John C. Melaniphy, Corporation Counsel of City of Chicago, for defendants-appellants; L. Louis Karton, Head of Appeals and Review Division, Sydney R. Drebin, and Robert J. Collins, Assistant Corporation Counsel, all of Chicago, of counsel.
    Michael F. Ryan, of Chicago, for appellee; Richard F. McPartlin, Jr., of Chicago, of counsel.
   JUDGE FRIEND

delivered the opinion of the court.

This is a mandamus proceeding by a former employee of the building department of the City of Chicago who was discharged during his probationary period. He asked that the court declare his discharge illegal, and that it order his reinstatement and reimbursement of alleged lost salary.

The complaint alleged that plaintiff took and successfully passed the civil service examination for the position of building inspector of the City of Chicago; that thereafter, on September 16, 1954 he was appointed to the position, entered upon the performance of his duties on that date, and continued therein up to and including February 5, 1955; that on the latter date he received a letter from the acting commissioner of the department of buildings of the City of Chicago, dated February 4, 1955, stating that his services as a building inspector were terminated, effective February 4, 1955, because plaintiff had “made false and misleading statements” in his application for building inspector; that he performed his duties to the complete satisfaction of his superiors and was guilty of no matter, cause or thing showing inefficiency or incapacity in the performance thereof; that the records of the civil service commission disclose that on February 4,1955 the acting commissioner of the department of buildings addressed a letter to the president of the civil service commission stating that effective February 4, 1955 lie was terminating the services of the plaintiff as a probationary civil service building inspector for the reason that the civil service rating sheets filed in the civil service examination, taken on May 22,1954, contained false and misleading information as to education; that on February 4, 1955 the civil service commission addressed a letter to the acting commissioner of the department of buildings stating that on that date the commission had entered an order granting authority for the discharge of plaintiff, and that the minutes of the commission further indicated that authority was granted for his discharge on that date; that in December 1954 he had been notified to appear at the offices of the civil service commission for the purpose of reviewing the experience rating form submitted by him in the original entrance examination for the position of building inspector; that he had appeared at the time and place requested and was questioned relative to his attendance at De La Salle High School and at the Illinois Institute of Technology; that he submitted diplomas attesting his attendance at and graduation from said schools; that attendance at or graduation from a high school, college or technical school was not a qualification for eligibility to participate in the examination for building inspector, and that he at no time had made any false statements concerning his education. In his complaint he quoted from section 10 of the Cities Civil Service Act (Ill. Rev. Stat. 1955, ch. 24%, par. 48) and section 5 of rule IV of the civil service commission, and alleged that the purpose of the probationary period provided for in the statute and the rules is to afford a department head an opportunity to observe the appointee in the actual performance of his duties so as to determine whether he can adequately perform such duties; that under the statute and the rules, the power of removal during probation is vested in the head of the department, subject to the prior approval of the civil service commission in the manner set forth in its rules; that the commission is not vested with the power of removal during the probationary period, and has no power to order the removal of a probationary appointee; and that during probation the jurisdiction of the civil service commission is limited under the statute and the rules to consenting to or approving a request for the discharge of a probationary appointee voluntarily made by the head of the department in which the appointee is working. He alleged, on information and belief, that he was not voluntarily discharged by the acting commissioner of the department of buildings but that the acting commissioner was ordered and directed by the civil service commission to discharge him; and that the commission was without warrant, authority or jurisdiction to direct him to report for any interviews, and was without authority to subvert the provisions of the statute by usurping the functions of the head of the department of buildings in directing the discharge of plaintiff during his probationary period; and additionally he charged that his dismissal was arranged and predetermined by Stephen E. Hurley, then president of the civil service commission.

It was further alleged that the purported reason for discharge assigned by the acting commissioner of the department of buildings in his letter of discharge to plaintiff was different from the purported reason for discharge set forth in the letter to the civil service commission under the same date; that by reason thereof there was no legal consent given by the civil service commission to the discharge of the plaintiff because there was no meeting of the minds between the acting commissioner and members of the civil service commission as to the reason for plaintiff’s discharge; that it appears from the letter to the commission that the acting commissioner of the department of building did not request the prior approval of the commission but merely informed the commission that he was terminating the appointment of the employee, and that by reason thereof the action of the commissioner was premature, void, illegal and of no force and effect. There were further allegations in the complaint pertaining to plaintiff’s right for reimbursement for loss of salary.

Defendants filed their motion to strike the complaint and dismiss the suit, contending that the complaint did not show a clear and undeniable right in plaintiff for the relief he sought, and was insufficient to warrant the granting of the writ of mandamus; that the defendants did not violate any duty incumbent upon them to perform but acted strictly in conformity with and pursuant to the law and the statute; that section 10 of the Cities Civil Service Act vested the power of removal of probationary civil service employees exclusively in the heads of departments of municipalities, and that such power is wholly administrative, discretionary and summary in nature, and that therefore mandamus does not lie to review such discretionary act; that the complaint showed and admitted that plaintiff was appointed a probationary building inspector, was suspended and later discharged during his probationary period pursuant to written request, by the acting commissioner of the department of buildings for the reasons stated therein, for concurrence therein and authority therefor, which request was granted, in writing, by the civil service commission. The court denied the motion of defendants to strike the complaint and to dismiss the suit, and ordered them to file their answer.

Defendants’ answer admitted that plaintiff had passed the examination for building inspector, that he was certified and appointed a probationary building inspector, and averred that on February 4, 1955 the acting commissioner of the department of buildings sent plaintiff a letter terminating his services as a probationary employee because he had made false and misleading statements in his application; that the civil service commission entered an order granting authority for the discharge of plaintiff for the reasons indicated in the letter of the building commissioner to the commission, and that its records indicated that such authority was granted in the minutes of the commission under date of February 4, 1955. The answer of defendants also admitted that plaintiff was called before the civil service commission on December 17, 1954 for the investigation of data submitted by plaintiff in the examination for building inspector, but denied plaintiff’s allegations that he had not made any false statements concerning his education. The answer then quoted portions of section 10 of the Cities Civil Service Act, section 5 of rule IY and section 6 of rule II of the rules and regulations of the civil service commission, and alleged that section 6 of rule II providing that no hearing shall be necessary prior to discharging a probationary employee was in full force and effect at the time plaintiff was suspended and discharged on February 4, 1955, and therefore plaintiff could not possibly be entitled to a hearing before his discharge as a probationer; and that there is no provision in section 10 of the Cities Civil Service Act or in the rules of the civil service commission that provide for a hearing for a probationer before his discharge.

No testimony was adduced upon the hearing. The judgment order was entered on plaintiff’s motion for judgment on the pleadings. Defendants appeal.

Defendants argue and cite cases in support of their contention that a motion for judgment on the pleadings should be denied where issues of fact are raised by tbe pleadings, bnt we have reached tbe conclusion, after an examination of tbe pleadings, tbe statute and tbe rules, that tbe court should bave sustained defendants’ motion to strike tbe complaint and to dismiss plaintiff’s suit since it appears on tbe face of tbe record that plaintiff was properly discharged. It is admitted that plaintiff was a probationer who bad not yet completed bis six-month probationary service. He was therefore subject to tbe provisions of tbe Civil Service Act and to tbe rules of tbe civil service commission which pertain to probation. Section 4 of an Act to Regulate tbe Civil Service of Cities (Ill. Rev. Stat. 1955, cb. 24%, par. 42) gives tbe civil service commission authority to make rules to carry out tbe purpose of tbe Act. Section 10 (par. 48) of the Act provides that “at or before tbe expiration of tbe period of probation, tbe bead of tbe department or office in which a candidate is employed may, by and with tbe consent of said commission, discharge him upon assigning in writing bis reason therefor to said commission.” Originally section 6 of rule II of tbe rules of tbe civil service commission provided that proof of false statements made in any application or in any experience rating sheet or other statements given in an examination or of tbe violation of any statute or of any rule should be grounds for excluding an applicant from an eligible register or for dismissal from the service after certification, provided that tbe appointee be given an opportunity to be beard in bis own defense. However, effective November 19, 1953, tbe above section was amended so that tbe provision for a bearing does not apply to a probationer; and since plaintiff was appointed on September 16, 1954 and discharged as a probationer on February 4, 1955, be was not entitled to a bearing before discharge. It therefore appears that plaintiff, as a probationer, was properly discharged in accordance with the statute and the rules of the commission.

The allegation of the complaint that plaintiff was discharged, not at the initiation of the acting head, but, rather, at the instigation of the commission, is stated upon information and belief. However, plaintiff’s complaint set forth in full the letter of the head of the building department directed to the president of the civil service commission with reference to termination of plaintiff’s service, and also the letter of the commission addressed to the building department head granting authority for plaintiff’s discharge. It is thus apparent that the procedure followed by the department head and the commission was in compliance with the statute. Inasmuch as plaintiff was not entitled to a hearing under the rules of the commission, it appears on the face of the complaint that plaintiff was properly discharged, and defendants’ motion to strike the complaint and to dismiss the suit should have been allowed.

Plaintiff raised the question whether a misstatement of educational background would justify the removal and discharge of a probationer. In People ex rel. Jendrick v. Allman, 396 Ill. 35, the court was asked to consider the constitutionality of an amendment to the Civil Service Act which provided in effect that no person appointed in the classified civil service who was entitled to military preference should be removed or discharged because he misstated his age. In holding the amendment invalid, the court observed that the attempt of the General Assembly not only to grant a veteran immunity from the consequences of his fraudulent act, but to secure for him a reinstatement of his position, which he fraudulently obtained in the first instance, is repugnant, not only to the constitutional provision against granting special privileges and immunities to favored classes, but is likewise repugnant to basic morality. Educational background may be a significant factor to be considered in employing personnel, and tbe attitude of tbe court with reference to a misstatement concerning age is likewise applicable to a misstatement concerning academic preparation.

On oral argument plaintiff stressed what was said in People ex rel. Walker v. O’Connor, 351 Ill. App. 545. The Walker opinion was filed on July 2, 1953, while tbe amendment to section 6 of rule II of tbe civil service commission did not become effective until November 19, 1953; hence, tbe underlying reasons'for tbe decision in that case are no longer controlling. Tbe Act as amended does not provide a bearing for a probationer, but only for those civil service employees who have been appointed and have completed their six-month probationary period.

For tbe reasons indicated we are of opinion that tbe motion for judgment on tbe pleadings should have been denied, and tbe motion to strike tbe complaint and to dismiss tbe suit, should have been sustained. Accordingly, tbe judgment of tbe Circuit Court is reversed, and judgment is entered here against plaintiff for dismissal of tbe suit.

Judgment in favor of plaintiff reversed and judgment entered here against plaintiff .for dismissal of suit.

NIEMEYER, P. J. and BURKE, J., concur.


author: PEESIDING JUSTICE NIEMEYEE

text:
    Hamilton Glass Company, Appellant, v. Irwin Shaffer, d/b/a City Glass Co., Appellee.
    Gen. No. 46,944.
    First District, First Division.
    January 7, 1957.
    Eeleased for publication February 11, 1957.
    Koven, Koven & Salzman, of Chicago, for appellant; Henry H. Koven, Howard E. Koven, and Paul Homer, all of Chicago, of counsel.
    Collen, Kessler and Kadison, of Chicago, for appellees; Mark A. Greenhouse, of Chicago, of counsel.
   PEESIDING JUSTICE NIEMEYEE

delivered the opinion of the court.

Plaintiff appeals from a judgment for defendant entered on a verdict directed at the close of plaintiff’s evidence in its action for money had and received by defendant.

Garland Construction Company, hereinafter called Garland, employed plaintiff and defendant as separate and independent contractors to glaze certain houses Garland was building in Mundelein, Illinois. The proceeds of loans obtained by Garland from the bank were retained by it and paid to suppliers of building material on payout orders signed by Garland directing the bank to pay the sum specified to the supplier named. The payout orders identified the specific loan from which the money was to be paid by reference to the address of the house for which the material and labor had been supplied. In addition to the waiver of lien and the certificate by Garland that the supplier named in the order had in fact supplied the material and performed the work at the house at the stated address, the supplier, as a condition precedent for payment, was required to make affidavit that the material and work had been supplied by him at the stated address and that no lien existed against the property at that address.

Plaintiff sues for $360, the contract price of glazing six houses identified by street numbers, and $162 under additional agreements to glaze other buildings— a total of $522, alleging that it requested payment from Garland and the bank, which was acting as paying agent for Garland, and was refused payment for the reason that the money due plaintiff for the glazing above mentioned “had been paid to defendant upon the representation of defendant that he had furnished the glass and glazing for the buildings and that he was entitled to payment, in support of which representation the defendant executed and delivered to said bank his affidavit and waivers of lien, copies of which are attached to the Statement of Claim and marked Exhibits 1 to 6, inclusive.”

Defendant admitted the execution and delivery of the original affidavits and waivers of liens and the correctness of the copies. The truth of the statements in the affidavits was affirmed by defendant, and his right to the money received asserted in his answer. On the trial plaintiff introduced evidence proving prima facie that plaintiff did the glazing stated in the complaint, and the price to be paid therefor. On a motion to direct a verdict for defendant at the close of plaintiff’s evidence the court stated that plaintiff’s right of action was against the bankrupt Garland, and there was no cause of action at all against defendant. A verdict was directed.

As plaintiff contends, the question on the motion to direct a verdict was whether there was any evidence fairly tending to support the complaint, and not the legal sufficiency of the complaint. McDermott v. Burke, 256 Ill. 401, 405; Smith v. Redman, 244 Ill. App. 434. However, the court erred in holding that plaintiff had no cause of action against defendant. If, as plaintiff alleges, it, and not defendant, did the glazing for which it sues, and defendant, by falsely representing (whether wilfully or innocently, is not material) that it did the work, received payment from the bank, defendant obtained money to which it was not lawfully entitled and which plaintiff can recover in an action for money had and received. Board of Highway Comrs. v. City of Bloomington, 253 Ill. 164; National Malleable Castings Co. v. Iroquois Steel & Iron Co., 333 Ill. 588; Motor Power Equip. Co. v. Mercantile Discount Corp., 267 Ill. App. 55.

The judgment is reversed and the cause remanded for further proceedings consistent with this opinion.

Reversed and remanded.

BURKE and FRIEND, JJ., concur.


author: PRESIDING JUSTICE NIEMETER

text:
    Jaroslava Minarik, Plaintiff, Florence Ellison, Petitioner-Appellant, v. Commonwealth Edison Company, and Northern Illinois Gas Company, Appellees.
    Gen. No. 46,987.
    •First District, First Division.
    January 7, 1957.
    Released for publication February 11, 1957.
    Harry R. Booth, Joseph Keig, Sr., aud John O’C. Fitzgerald, all of Chicago, for appellant.
    Isham, Lincoln & Beale, of Chicago, for Commonwealth Edison Company; Charles A. Bane, of counsel.
   PRESIDING JUSTICE NIEMETER

delivered the opinion of the court.

Florence Ellison, herein called petitioner, the owner of two of more than 6,000,000 outstanding shares of common stock of the defendant Northern Illinois Gas Company, herein called Northern, appeals from an order denying her petition to vacate an order of dismissal, on stipulation of the parties signed by plaintiff pro se without prejudice, of plaintiff’s derivative action to recover from defendant Commonwealth Edison Company, herein called Edison, on behalf of Northern, $6,500,000, alleged to be promoter’s profit made by Edison out of its purchase and sale of the preferred stock (100,000 shares) of Northern.

The complaint herein was filed April 27, 1955. On May 18, 1955, after notice to plaintiff’s attorneys and pursuant to stipulation signed by plaintiff pro se, the complaint was stricken and the cause dismissed without prejudice at plaintiff’s costs, all costs having been paid. On June 2, 1955, petitioner being represented by the attorneys who filed the original complaint herein, filed her petition to vacate the order of dismissal of May 18, 1955 and for permission to intervene and be made party-plaintiff in the cause and to adopt the complaint theretofore filed. In this petition it was alleged that the suit was dismissed without notice of the proposed dismissal being given to the common stockholders of Northern, as required by Buie 28 of the Superior Court, as follows:

“A class action shall not be dismissed or compromised without the approval of the court. If the right sought to be enforced is joint or common or secondary, in the sense that the owner of a primary right refuses to enforce the right, and a member of the class thereby becomes entitled to enforce it, notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.”

The prayer of the petition was denied.

No prejudice to petitioner by the dismissal of this suit is alleged or proved. So far as the record shows, she may at any time institute as party plaintiff a similar action against defendants for the relief prayed for in the original complaint. The right of a plaintiff to control the litigation, notwithstanding the protest of her attorneys of record, cannot be questioned, and the court in its discretion could recognize plaintiff’s stipulation. Henchey v. City of Chicago, 41 Ill. 136. This suit, being a derivative action, was a class action covered by Rule 28 of the Superior Court, hereinabove quoted. However, as the dismissal of the suit was without prejudice, the rule of court was not applicable. It is not and cannot be contended that the order of dismissal herein is a bar to an original action by petitioner. In considering a similar rule in the federal courts it was held that the rule- did not apply where the dismissal of the action could not affect any person other than the named plaintiff. May v. Midwest Refining Co., 121 F.2d 431 (C.C.A. 1st Cir.). Moreover, if the order of dismissal was a violation of the rule of the Superior Court, that fact is not ground for reversal where, as here, no injustice has been done to anyone. Field v. Chicago, D. & V. R. R. Co., 68 Ill. 367.

The order is affirmed.

Affirmed.

BURKE and FRIEND, JJ., concur.


author: PBESIDING JUSTICE NIEMEYEB

text:
    Morris Nagel, et al., Appellants, v. Northern Illinois Gas Company, et al., Appellees.
    Gen. No. 46,970.
    First District, First Division.
    January 7, 1957.
    Released for publication February 11, 1957.

      Sydney B. and Morris J. Wexler, and Howard Perry Kamin, all of Chicago, for plaintiffs-appellants; Morris J. Wexler, Howard Perry Kamin, and Allen Gross-man, all of Chicago, of counsel.
    Wilson & Mcllvaine, of Chicago, and Putnam, Johnson & Alschuler, of Aurora, for Northern Illinois Gas Company; W. P. Gilbert, Charles W. Boand, George W. Thompson, of Chicago, and Sam Alschuler, of Aurora, of counsel; Max Swiren, Isham, Lincoln & Beale, and Lynch & Schaller, all of Chicago, for Commonwealth Edison Company and the individual defendants; Max Swiren, Charles A. Bane, William J. Lynch, and Myron Lieberman, all of Chicago, of counsel.
   PBESIDING JUSTICE NIEMEYEB

delivered the opinion of the court.

Plaintiffs, the owners of 651 shares of more than 16,000,000 outstanding common shares of .defendant Commonwealth Edison Company (herein called Edison), appeal from a judgment for defendants in plaintiffs’ derivative action for the rescission of a contract between Edison and its subsidiary, the defendant Northern Illinois Gas Company (herein called Northern), designated their “Final Separation Contract,” the restoration to Edison of assets valued in excess of $5,000,000, alleged to have been given away without consideration by Edison to Northern pursuant to the terms of the Final Separation Contract, and damages to Edison resulting from the negligence and breach of duty of the directors of Edison, defendants herein, in giving away such assets. The judgment was entered on defendants’ motions to dismiss the complaint, as amended, in which defendants assigned with other grounds for dismissal the failure to state a cause of action that Edison could enforce.

Edison was and is a public utility, supplying electricity. Prior to February 9, 1954 it supplied gas. On the latter date it transferred its gas and heating-properties to Northern, a recently created corporation, and received as part consideration therefor 5,892,484 shares of Northern common stock, each share representing $10 of the actual net assets of Northern. Concurrently with the transfer it purchased 100,000 shares of Northern 5 per cent convertible preferred stock for $10,000,000 in cash to provide working capital and construction funds for Northern. Each share of the preferred stock is of the par value of $100 and convertible after January 31, 1957 into 10 shares of Northern common stock.

April 27, 1954 Northern publicly offered and sold 400,000 shares of common stock at $15.75 per share to procure additional working capital. Until this sale Northern was a wholly owned subsidiary of Edison.

August 2, 1954, pursuant to its announced intention to distribute its Northern common stock to holders of its common stock, Edison declared a dividend in kind of 656,454 shares of Northern common stock on the basis of one share of Northern for each 25 shares of Edison. The holders of Edison common stock received 422,480 shares of Northern. The remaining 233,974 shares were sold and the proceeds distributed to Edison shareholders electing to receive cash instead of stock.

January 26, 1955 Edison and Northern entered into the Final Separation Contract, reciting that Edison desired a firm understanding with Northern that certain agreements and transactions- would be entered into and carried out between them before recommending that its hoard of directors authorize the distribution to its common stockholders of a number of shares of Northern common stock constituting not less than 80 per cent of the total voting power represented by the then outstanding preferred and common stock of Northern as a tax-free dividend, and accepting offers to purchase the 100,000 shares of Northern preferred stock held by Edison at $165 per share. This recital is followed by an agreement between the parties with respect to a number of intercompany matters stated in separate paragraphs in the contract.

Plaintiffs object only to two transactions: (1) The waiver by Edison of any right it might have to $96,141.64, the amount of a refund paid by the Texas-Illinois Natural Gas Pipeline Company to Northern allocable to purchases by the gas department of Edison during January 1954, Northern indemnifying and agreeing to hold Edison harmless from any claims by gas customers with respect to or by reason of such allocable portion of the refund; (2) The surrender by Edison to Northern, promptly following confirmation and acceptance of the Final Separation Contract by Northern, of 253,915 shares of Northern common stock and the canceling of such stock by Northern. At the closing market price on the date of the contract the shares later surrendered had a total market value of $5,046,560.63.

The Final Separation Contract was entered into pursuant to resolutions of the board of directors of Edison and Northern. Ten of the seventeen members of the Edison board were members of the eleven-member-board of Northern. Upon confirmation and acceptance of the contract by Northern, Edison sold 100,000 shares of Northern preferred stock and received therefor $16,500,000 on February 1, 1955. It also surrendered 253,915 shares of Northern common stock and same were canceled. On March 1, 1955 it distributed as a dividend in kind 4,982,115 shares of Northern common stock to its common shareholders on the basis of three shares of Northern common stock for each ten shares of Edison common stock, thereby terminating its holding of Northern stock. On July 15,1955 the five original plaintiffs, owners of 70 shares of Edison common stock, by letter requested that the directors and executive officers of Edison take appropriate action to procure the relief sought herein. No reply was received by plaintiffs.

Plaintiffs allege that the provisions of each paragraph of the Final Separation Contract, numbered 1 to 12 inclusive, are separate agreements entered into at various times prior to the date of the Final Separation Contract, and that in making each of these separate agreements the corporations did not take into account the benefits conferred or the detriment incurred by them in making any one or more of the other separate agreements but grouped all of the agreements for convenience in separate paragraphs in the Final Separation Contract; that Edison received no assets, rights or benefits in exchange for its waiver of any right to the refund and the surrender of the Northern common stock for cancellation, or alternatively, if the separate agreements in the Final Separation Contract are mutually dependent on each other, the net value of the assets, rights and benefits to Edison under all the agreements was less than $50,000; that in either case the waiver of any right to the refund and the surrender of the Northern common stock for cancellation were a giveaway of Edison’s assets, valued in excess of $5,000,000, and are voidable by Edison as unfair, unconscionable, and an unjust enrichment of Northern; that the directors of Edison negligently sacrificed the interest of Edison and negligently permitted the waste and misappropriation of its assets by authorizing the acts complained of; that these transactions are fraudulent in law as to Edison. ■ .

Edison and its directors joined in a motion to dismiss the complaint. Northern filed a separate motion. While the motions were pending, four stockholders owning a total of 324 shares of Edison common stock, and then five stockholders owning a total of 257 shares of common, were made additional parties plaintiff, making fourteen stockholders, owning 651 shares of Edison common, parties plaintiff.

Plaintiffs by leave of court amended the complaint by adding allegations intended by them to excuse application to the stockholders of Edison to take appropriate action to obtain the relief sought herein.

The motions of defendants to dismiss the complaint were ordered to stand as motions to dismiss the complaint as amended. After hearing, the complaint as amended was dismissed with prejudice, and'plaintiffs having elected to stand on the complaint as' amended, hereinafter called amended complaint, judgment was entered that plaintiffs take nothing by the action and defendants go hence without day.

The right to maintain this suit rests upon the existence of a cause of action against the defendants Northern and the directors of Edison, in favor of Edison, and upon the neglect and refusal of the corporate body to act for itself. 13 Am. Jur., Corporations, sec. 461, page 506; Murphy v. Candor, 263 Ill. App. 226. The right of action in Edison on which plaintiffs rely is based on the charge that the directors of Edison negligently sacrificed the interests of Edison and negligently permitted the waste and misappropriation of its assets by authorizing the waiver of any right to the refund and the surrender of the Northern common stock for cancellation. Plaintiffs say in their brief, in speaking of the latter transaction, the directors “completely overlooked the substantive corporate interests of Edison” and they “overlooked the necessity of getting full value in return.” There is no charge of fraud, personal benefit or ulterior motive on the part of any Edison director, or that any stockholder of Edison received any advantage or sustained any loss from the acts complained of which was not equally shared in or sustained by plaintiffs and all other shareholders of Edison.

No presumption of want or gross inadequacy of consideration arises from the fact that ten of the seventeen directors of Edison were also ten of the eleven directors of Northern. In White v. Stevens, 326 Ill. 528, 533, the court said:

“It has also been repeatedly held that corporations having one or more common directors may contract with each other if the contracts are fair and reasonable. There is no presumption in such case that the contract is unfair or oppressive but the person attacking it must prove its unfairness.”

This is especially true in the anomalous case before us where recovery is sought on behalf of the parent or dominant corporation, owning 83.5 per cent of the stock of the subsidiary corporation when the contract sued upon was made, on the ground that the directors of the parent corporation negligently failed to protect its interest. The stock in Northern, if any, owned by the directors common to the two companies is not shown. These directors were elected to each board by Edison and it may be assumed that they were concerned primarily in serving Edison, the company that chose them. Bresnick v. Franklin Capital Corp., 77 A.2d 53 (App. Div. N. J. 1950), aff’d 81 A.2d 6 (N. J. 1951).

Whether the allegations of the amended complaint state a cause of action, depends on the construction of the Final Separation Contract in the light of well pleaded facts in the amended complaint. A copy of the contract is attached to and incorporated in the amended complaint. If any allegations of the complaint are inconsistent with the provisions of the contract, the latter will control. As stated in Price v. Solberg, 269 Ill. 459, 462:

“The contract being made a part of the bill, if any facts alleged in the bill differ from the facts stated in the contract the latter must control. The demurrer will not admit the truth of such inconsistent allegations of the bill. (Greig v. Russell, 115 Ill. 483; Armstrong v. Building Ass’n, 176 id. 298.) The only question in this case is as to the proper construction of this contract.”

See also Awotin v. Abrams, 309 Ill. App. 421, 425-6. Moreover, the rule that a motion to strike admits well pleaded facts, does not extend to the conclusions drawn by the pleader. The complaint, in order to stand, must contain sufficient averments of facts to state a cause of action. Stenwall v. Bergstrom, 398 Ill. 377, 383. Or, as said in Katzin v. Nabco Liquidating Co., 323 Ill. App. 286 (First Dist. (Abst.) Gen. No. 42489),

“It is the settled law that a motion to strike is in the nature of a general demurrer and it admits the truth only of facts properly pleaded, as distinguished from conclusions, and every allegation is to be taken most strongly against the pleader. The allegation in question, in our judgment, is a mere conclusion of the pleader. Plaintiffs should have pleaded facts sufficient to make out a prima facie showing that the conclusion of the pleader was warranted.”

The latter case was a derivative suit by stockholders of Nabco against the directors of Nabco and a corporation to which assets of Nabco had been sold, seeking rescission of the sale and damages from the directors because, as alleged in the amended complaint, “the sale price fixed in said contract of sale is at least $10,000,000 less than the fair value of the assets sold thereunder.”

The Final Separation Contract is in the form of a letter dated January 26,1955 from Edison to Northern, confirmed and accepted on the same day by Northern, concluding as follows:

“If the foregoing correctly sets forth our understanding with respect to the above arrangements in contemplation of the final separation of Edison and Northern Gas, please confirm and accept . . . whereupon it shall constitute a binding contract between Edison and Northern Gas . . . , which contract may thereafter be referred to as their ‘Final Separation Contract.’ ”

It thus appears, notwithstanding the allegations of the amended complaint, that the agreements in the separate paragraphs form a single contract, intended by the parties to effect the final separation of Edison and Northern and to divest Edison of all stock ownership in Northern. Plaintiffs do not attack these objectives. As hereinbefore stated, they complain only of the waiver of any right in the refund, and the surrender of the Northern stock for cancellation. They allege that by these transactions “Edison gave to Northern assets, rights and benefits of a value in excess of $5,000,000” and received in return, under the Final Separation Contract, assets, rights and benefits of a net value of less than $50,000. These allegations are mere conclusions of the pleader and not an averment of the fact of gross inadequacy of consideration, unless warranted by the provisions of the contract and the well pleaded facts in the amended complaint consistent with the contract.

With respect to the waiver by Edison of any right to the refund paid to Northern by the pipeline company allocable to purchases by the gas department of Edison during January 1954, no facts are shown by which, the loss, if any, to Edison by the waiver can be ascertained. Neither the nature nor the basis of any right of Edison in the refund is shown. The undertaking of Northern to indemnify • and hold Edison harmless from any claims by gas customers with respect to or by reason of such allocable portion of the refund, raises an inference that some part, if not all, of the refund may be payable to the gas customers.

In alleging that the surrender and cancellation of the Northern stock was a giveaway of the full market value of the stock — $5,046,560.63, and an unjust enrichment of Northern, plaintiffs misconceive the effect of the transaction. Upon cancellation of the stock, Northern did not have a single dollar more in assets than before. It had 253,915 fewer shares of common stock outstanding, and each outstanding common share represented a slightly larger interest in Northern. Edison, as the owner of 82.5 per cent of the- outstanding common stock of Northern after the cancellation of the shares surrendered, received 82.5 per cent of the benefit to Northern stockholders from the transaction —an increase of more than $4,125,000 in the interest represented by 4,982,115 shares of common stock retained by it. The giveaway, if any, by the surrender and cancellation of the stock, considered as a separate transaction, was less than $900,000 — the increased interest in Northern represented by the remaining stock outstanding, some of which was held by Edison shareholders or their assigns.

Plaintiffs do not complain of any further loss to Edison under the contract. We therefore assume that the remaining agreements were beneficial, or at least not detrimental, to Edison. The contract and the amended complaint show the receipt by Edison of benefits under paragraph one of the contract in excess of $300,000. By the provisions of this paragraph the parties agreed to file consolidated federal income tax returns for the year ending December 31, 1954, and for each subsequent year or a portion thereof with respect to which Edison shall be entitled under the Internal Revenue Act to file such income tax returns. The amended complaint shows the various dividends declared and paid by Northern on its common and preferred stock during 1954 and on February 1, 1955, and the number of shares of stock held by Edison on the respective dates of the dividends, from which it appears by computation that Edison during the period stated received dividends from Northern totaling $4,324,014.20, on which Edison would save, in income taxes under a consolidated return, in excess of $300,000.

Other possible benefits to Edison from the consolidated income tax returns cannot be evaluated on the record before us. Because of the failure to aver sufficient facts there can be no evaluation of the possible benefits to Edison from the following provisions of the Final Separation Contract: (a) The agreement of the parties to execute and deliver a supplemental agreement to their boiler gas fuel contract; (b) Northern’s agreement, at its expense, to prepare and issue such certificates and establish and maintain stockholders’ accounts required or occasioned by Edison’s distribution of Northern common stock to Edison stockholders after the above-mentioned surrender of Northern common stock for cancellation; (c) Northern’s agreement, if Edison should contract to purchase the electric and steam-heating utility at De Kalb, Illinois, to acquire and pay for the steam-heating business and assume full responsibility in connection with the steam-heating properties, franchises and business; (d) Northern’s agreement to pay all federal stamp taxes, if any, on account of Northern bonds issued under Edison’s indenture, adopted by Northern on February 9, 1954; (e) The agreement to complete the transfer of assets between the Edison and Northern Service Annuity Funds and take other action for the continuance of existing arrangements relating to the transfer of contributions and paid-up life insurance; (f) The agreement to continue mutual participation in certain blanket fire and extended coverage insurance policies — Edison to retain possession and control of the policies; (g) Northern’s agreement, at its expense, to render the assistance specified in the contract in connection with Edison’s proposed sale of Northern 5 per cent convertible preferred stock. In addition, there are no allegations of fact from which it is possible to evaluate the possible benefits to Edison and its stockholders, including plaintiffs, of the final separation of Edison and Northern and the divesting of Edison of its stock ownership in Northern and the distribution of the Northern stock to Edison stockholders as a tax-free dividend. The burden of alleging and proving the gross inadequacy of consideration on which plaintiffs base their suit is on them. They do not meet this burden by leaving uncertain the net value of the possible benefits to Edison. Their failure to allege facts justifying their conclusion that the “net value of the assets, rights and benefits to Edison under all of said agreements was less than $50,000,” is a failure to state a cause of action. The court did not err in sustaining the motions of defendants' and entering judgment for them.

Having reached this conclusion it is unnecessary to extend this opinion by a discussion and decision of the question whether plaintiffs had exhausted their remedies within the corporation before instituting suit.

The judgment is affirmed.

Affirmed.

BURKE and FRIEND, JJ., concur.