author: MR. JUSTICE SEIDENFELD

text:
    Country Mutual Insurance Company, an Insurance Corporation, Plaintiff-Appellant, v. Donald Murray, Jr., et al., Defendants-Appellees. Lucille V. Leonardson, Counterplaintiff-Appellee, v. Country Mutual Insurance Company, an Insurance Corporation, Counterdefendant-Appellant. William Leuellen, Ila Leuellen, Counterplaintiffs-Appellees, and Charles Shepard, Jr., Counterplaintiff-Appellant, v. Country Mutual Insurance Company, an Insurance Corporation, Counterdefendant-Appellee.
    Gen. No. 67-165.
    Second Judicial District.
    August 8, 1968.

      Maynard, Maynard & Brassfield, of Rockford, for appellant.
    Barrick, Jackson & Switzer, Miller, Hickey, Collins, Gilbert & Powers, and North, North & Ohlson, of Rockford, for appellees.
   MR. JUSTICE SEIDENFELD

delivered the opinion of the court.

Country Mutual Insurance Company, plaintiff, appeals from an adverse judgment on its complaint for a declaratory judgment to determine coverage under an automobile liability policy. It further appeals from judgment on counterclaims, requiring it to pay a personal injury judgment of Lucille V. Leonardson previously secured against Charles Shepard, Jr., and medical payments under the policy, and to defend Shepard in a second personal injury suit brought by Donald Murray, Jr. arising out of the same accident. Shepard has also appealed from a judgment by the trial court denying reimbursement for costs of defense of the Leonardson suit.

There is evidence that William Leuellen and Ila Leuellen, husband and wife, resided at Davis Junction, Illinois. In April, 1963, they were the owners of a 1962 Ford which they insured for liability with the Country Mutual Insurance Company. The certificate of title to this vehicle was held by C. I. T. Finance Company, through whom they had financed its purchase. A disability policy was written in conjunction therewith, providing for payment of installments due in the event of physical disability of William Leuellen. The automobile liability policy lapsed because of nonpayment of premium. During the year 1964 William Leuellen went on public aid as a result of physical disability. The disability policy thereafter paid the loan installments.

In December, 1964, the Leuellens insured a 1954 Ford with Country Mutual. Being a recipient of public aid, William Leuellen was not allowed to drive a vehicle worth more than $400, and the value of the 1962 Ford which they still owned obviously exceeded this limitation. Consequently, the 1962 Ford was garaged, and was not driven by the Leuellens.

Charles Shepard, Jr., a son of Ila Leuellen, resided in Rockford, Illinois. In early February, 1965, he purchased a 1957 Ford from a dealer in Rockford, and financed this purchase through General Finance Loan Corporation, which thereafter retained the certificate of title to this car.

At the trial, evidence was introduced concerning an oral agreement then made between Shepard and the Leuellens whereby Shepard purchased the Leuellens’ 1962 Ford, and as a down payment delivered his 1957 Ford to the Leuellens. The balance of $1,200 was to be paid at the rate of $65 per month.

Shepard took possession of the 1962 Ford and operated it thereafter in and about Rockford, Illinois. He made two monthly payments of $65 to the Leuellens in March and April of 1965.

The Leuellens had disposed of their 1954 Ford, and on February 11, 1965, secured a transfer of insurance from that vehicle to the 1957 Ford. The transfer application reflected the purchase date on the 1957 Ford to have been February 4, 1965, and in a space provided under the heading, “In whose name is title issued” there was inserted the word “insured.” The transfer application was signed by William Leuellen. Mrs. Leuellen then operated the 1957 Ford around Davis Junction.

Neither Shepard nor the Leuellens notified the Secretary of State concerning the transactions described above. The certificate of title to the 1962 Ford remained in the possession of C. I. T. Finance Company and reflected the titleholder to be Leuellen. The disability carrier continued to pay the monthly finance installment thereon. The terms of the disability insurance contract were not introduced into evidence however. At the same time General Finance Corporation retained the certificate of title to the 1957 Ford which continued to list Shepard as titleholder.

On or about April 12, 1965, the motor in the 1957 Ford broke down. Mrs. Leuellen contacted Shepard and asked to rescind the agreement. Shepard agreed and the 1962 Ford was allegedly returned to Davis Junction and thereafter used by Mrs. Leuellen. The 1957 Ford was towed to Rockford, where Shepard tore it down for repairs. It was in this inoperative state on April 24, 1965.

On this latter date, Shepard was driven to Davis Junction, where he visited his mother, Mrs. Leuellen. There he borrowed the 1962 Ford and later that evening was involved in a serious collision while driving this vehicle.

Later, on April 28, 1965, Mrs. Leuellen sought to secure a transfer of insurance from the 1957 Ford to the 1962 Ford. Notice of the accident was first given to Country Mutual on May 5,1965.

On May 7, 1965, Shepard and the Leuellens gave a signed statement to the insurance company, detailing the series of transactions related above, as well as Shepard’s account of the occurrence of April 24, 1965. Shepard’s statement included an admission that he “hadn’t returned the 1962 Ford to mother yet when the accident occurred” which plaintiffs urged as impeachment of his trial testimony that the 1962 Ford was not in his possession and control at the time of the accident.

In that accident, Lucille Leonardson had been an occupant in the car Shepard was driving, and sustained severe injuries in the collision between her host’s car and one driven by Donald Murray, Jr.

She brought suit against Charles Shepard, Jr., and on October 25, 1966, her complaint was served on Shepard. The complaint contained an allegation that Shepard was driving the 1962 Ford with the permission of its owners, William Leuellen and Ila Leuellen. Country Mutual refused Shepard’s tendered defense of this personal injury suit.

On January 27, 1967, Country Mutual filed a suit for declaratory judgment against Donald Murray, Jr., Lucille V. Leonardson, William Leuellen, Ila Leuellen and Charles Shepard, Jr. Therein it sought to be relieved of (1) any duty to defend the Leonardson action against Shepard, (2) its obligation to pay any judgment rendered in that suit against Shepard, (3) any obligation under the policy with reference to the claim of Donald Murray, Jr.

While the declaratory judgment suit was pending, the personal injury action of Lucille Leonardson reached trial stage. Shepard, defended by his personally employed attorneys, was found guilty of wilful and wanton misconduct and a verdict for $25,000 in favor of the plaintiff, Lucille Leonardson, and against Shepard was awarded by the jury.

Thereafter, Country Mutual’s original declaratory judgment action was expanded to include a counterclaim wherein Lucille Leonardson then sought to compel Country Mutual to pay the judgment she had secured against Shepard, plus a claim for medical bills submitted under the medical payment portion of the policy. Country Mutual’s motion to dismiss this counterclaim was denied, as was a similar motion directed at a counterclaim filed by the Leuellens and Shepard, asking that Country Mutual reimburse Shepard for attorneys’ fees he incurred in defending the suit brought by Lucille Leonardson.

All counterclaimants subsequently filed motions for summary judgment, and these motions were denied. The series of actions and cross actions were then tried by the court, sitting without a jury, resulting in the entry of the orders and judgments from which these appeals have been taken.

A motion of Lucille Leonardson seeking reimbursement for printing costs occasioned by the appeal was ordered by this court to be taken with the case, together with the motion in opposition thereto.

In dispute is the application of the portion of the Leuellen policy which provides:

“3. AUTOMATIC INSURANCE ON NEWLY PURCHASED AUTOMOBILES
“If the automobile described in the Declarations is disposed of and another acquired in its place by the Named Insured, this policy shall without notice transfer to the newly acquired automobile.
“The terms of the two preceding paragraphs apply provided notice of delivery of such automobile to the Named Insured or spouse is given to the Company within the policy period then current or, if delivery is less than thirty (30) days prior to the end of such period, then within thirty (30) days after delivery.
99

I

The first point we have considered is Country Mutual’s contention that the counterclaims of Leonardson, Shepard and the Leuellens should have been dismissed by the trial court. The record discloses that Leonardson’s initial responsive pleading to Country Mutual’s declaratory action was an answer denying the insurer’s prayer for declaratory relief. After her personal injury claim against Shepard had been reduced to judgment, she sought and was granted leave to file her counterclaim seeking judgment for the money damages awarded to her in the common-law suit. Shepard, following his unsuccessful defense of the personal injury suit, filed his counterclaim for his attorneys’ fees in defending that action.

Plaintiff argues that the Declaratory Judgment Act prescribes the only manner in which the court may act in this situation. This statute provides:

“If further relief based upon a declaration of right becomes necessary or proper after the declaration has been made, application may be made by petition to any court having jurisdiction for an order directed to any party or parties whose rights have been determined by the declaration to show cause why the further relief should not be granted forthwith, upon reasonable notice prescribed by the court in its order.” (Ill Rev Stats 1965, c 110, § 57.1(3).)

Thus, it reasons, the court’s singular interest is limited to deciding the existence or nonexistence of insurance coverage, and if this decision favors Leonardson and/or Shepard, then ancillary petitions for coercive relief (as contained in their respective counterclaims) could be filed.

We do not regard this statute as dictating the only procedure that may be employed. It was within the sound discretion of the court to allow the use of counterclaims as in any action. Ill Rev Stats 1965, c 110, § 38. In our opinion, the Declaratory Judgment Act merely establishes an available procedure, but does not prohibit any other reasonable approach provided in the Civil Practice Act which serves to place the issues before the court.

Burgard v. Mascoutah Lumber Co., 6 Ill App2d 210, 218, 219, 127 NE2d 464 (1955), simply holds that no counterclaim is necessary to allow coercive relief on the part of the party opposing the declaratory action. Relief may be had by petition after a decision in the original action is announced. The case does not stand for the proposition that a counterclaim is prohibited.

Nor can State Farm Mut. Auto Ins. Co. v. Mohan, 85 Ill App2d 10, 22, 228 NE2d 283 (1967), be said to support the plaintiff’s position. Therein, the personal injury-action was unresolved, and it would have been improper to grant relief with respect to such unresolved issues.

II

Counterplaintiffs Leonardson and Shepard urge that they were entitled to a summary judgment, on the basis of the rulings in Sims v. Illinois Nat. Cas. Co. of Springfield, 43 Ill App2d 184, 193 NE2d 123 (1963), and McFadyen v. North River Ins. Co., 62 Ill App2d 164, 209 NE2d 833 (1965). Both cases acknowledge the obligation of an insurer to defend an action brought against its insured where the complaint in that action potentially sets forth a situation which would be covered by the policy. Under the premise that the duty to defend is broader than the duty to pay, the court looked to the “four corners” of the complaint, refusing to allow the carrier an avoidance of its obligation to defend, for reasons not reflected in the complaint itself.

In Sims, the complaint against the insured, alleged a host-passenger relationship, and a prayer for damages springing from the tortious conduct of the host driver. The company had reason to believe the passenger was an employee of their insured, defendant Sims, and, as such, his claim would be excluded under the policy terms and conditions. The refusal to defend was based upon knowledge possessed by the insurance carrier which was entirely outside of the complaint.

A similar situation existed in McFadyen, wherein the company claimed its “insured” operated a business on the insured premises, while the policy covered only residence hazards. They refused to defend the suit, choosing rather to contest the garnishment action later. The court held the unjustified refusal to defend estopped it from raising this defense in the ancillary proceeding. The decision in each case illustrates the principle that:

“The insurer’s duty to defend is predicated not upon information in its possession which indicates or even proves noncoverage. Rather, it is predicated upon the allegations in the complaint in an action brought against the insured and when such allegations state facts which bring the case within, or potentially within, the coverage of the policy, the insurer is from this time on unjustified in not defending the insured.” McFadyen v. North River Ins. Co., supra, at pages 170,171.

Thus, in each instance, it becomes necessary to review the content of the complaint, and, if taken at face value, it is found to allege a cause of action which the policy is designed to cover, the company is then compelled to defend its insured, or, as Sims and McFadyen explain, seek a declaratory judgment as to its obligations and rights or defend under a reservation of rights.

Country Mutual’s amended policy of February 11,1965, listed William Leuellen and/or Ila Leuellen as its named insured. It provided liability and medical payment coverage, and the automobile designated as the insured vehicle was a 1957 Ford. The policy contained the usual “omnibus” clause, as well as the standard provision that an “insured” includes any person other than the Named Insured, provided the actual use of the insured vehicle is with the permission of the Named Insured.

Looking now to the complaint, the essential elements pertinent to this inquiry recite:

“Defendant Charles Shepard, Jr., was operating a 1962 Ford automobile with the permission of its owners, William Leuellen and Ila Leuellen, . . . .”

Charles Shepard, Jr., is not a “named insured” under the Leuellen policy. He may be an “insured,” depending on the factual situation. Under the facts before us, permission to use the Named Insured’s vehicle could entitle him to coverage. Shepard, a stranger to the insurance contract, was presented to Country Mutual by the Leuellens as their permittee, seeking a defense under his permittor’s policy. He, in reality, was a potential insured.

Although the fact of permission is alleged in the complaint, we nonetheless regard its inclusion therein as immaterial. Permission in no way affects the plaintiff Leonardson’s recovery rights for personal injury against Shepard. We do not feel the draftsman of the plaintiff’s personal injury complaint should be the arbiter of the policy’s coverage. For the purpose of this decision, we consider the allegation to be superfluous and accord it no weight.

Similarly, by the policy terms the 1962 Ford might be covered. Coverage is neither negatived nor confirmed by the face of the complaint. It too, however, may be potentially covered, as a newly acquired automobile.

As a general rule, unless the complaint affirmatively alleges facts which, if true, would exclude coverage, the potentiality of coverage is present and imposes on the carrier certain obligations. Country Mutual contends that it fulfilled these obligations by the mere filing of the declaratory judgment suit, contesting the existence of coverage for Shepard. It thereby claims to have adequately preserved its right to assert noncoverage, after it refused to defend Shepard and judgment was entered against him.

Leonardson and Shepard contend that Country Mutual’s refusal to defend was unjustified, for it failed to judicially determine its coverage position prior to breaching the insurance contract. In effect, the rule they seek to apply would require Country Mutual to secure a declaratory judgment determination as to its obligations and rights or defend Shepard under a reservation of rights, if they wish to avoid estoppel by reason of their failure to defend.

We believe the latter position expresses the correct rule in a situation where the personal injury action reaches judgment before the declaratory judgment action achieves fruition and finality. In a case in which the policy is designed to cover the type of claim involved, wherein an insurer is presented with a claim that may or may not be covered by the policy, if the carrier refuses to provide its insured an unrestricted defense, yet desires to ultimately urge exclusionary coverage defenses, it must;

(1) Secure a declaratory judgment of its rights and obligations, while defending its potential insured on a reservation of rights, or

(2) Defend its potential insured on a reservation of rights and adjudicate its coverage in a supplemental suit. If it elects to defend under a reservation of rights, it must continue such defense until there is a final determination that the claim is not covered by the policy. If and when that becomes certain the insurer may turn back the defense. Firco, Inc. v. Fireman’s Fund Ins. Co., 173 Cal App2d 524, 343 P2d 311, 313 (1959); Fireman’s Fund Ins. Co. v. Chasson, 207 Cal App2d 801, 24 Cal Rptr 726, 729 (1962) ; General Ins. Co. of America v. Whitmore, 235 Cal App2d 670, 45 Cal Rptr 556, 560 (1965).

The trial court should, however, exercise its sound discretion in controlling the course of the declaratory judgment action and the personal injury suit if trial preference is sought by either party.

We hold that the trial court should have granted the summary relief prayed for by Leonardson and Shepard, inasmuch as Country Mutual unjustifiably breached its policy in refusing to defend Shepard in the Leonard-son injury action. It was therefore estopped from raising the exclusionary defenses it urged in its declaratory action.

Ill

In view of our holding that Leonardson, Shepard and Leuellens were entitled to summary judgment, it is apparent that the portion of the appeal attacking the entry of judgment after trial of the facts in the trial court now has application only to the claim of Donald Murray.

Country Mutual had not breached any duty to defend Shepard with respect to the claim of Donald Murray. Therefore, they were not estopped from raising a policy defense. With respect thereto, the theory that coverage existed under the Country Mutual policy to cover permit-tee Shepard while driving the 1962 Ford on April 24, 1965, was initially based on three coverage provisions. However, there seems to be no question but that the issue is limited as to whether the 1962 Ford is a “newly acquired” vehicle within the terms and definitions of the policy as interpreted by case law.

Country Mutual has not requested a new trial but has simply applied to this court to reverse the judgment of the trial court. The rule to be applied therefore, is that which applies to the direction of a verdict at trial court level, or the granting of a judgment n. o. v. This rule, commonly referred to as the Pedrick rule, states:

“. . . verdicts ought to be directed and judgments n. o. v. entered only in those cases in which all of the evidence, when viewed in its aspects most favorable to the opponent, so overwhelmingly favors movant that no contrary verdict based on that evidence could ever stand.” Pedrick v. Peoria & Eastern R. Co., 37 Ill2d 494, 510, 229 NE2d 504 (1967).

In light thereof, we have considered the entire evidence in its aspects most favorable to Murray.

We do not construe the Leuellens’ attempted application for transfer of coverage from the 1957 Ford to the 1962 Ford on April 28,1965, to be vital or relevant to the question of coverage, except, insofar as the trier of fact may have felt it affected the credibility of the person so acting. The fact of replacement here would suffice to extend coverage during the term of the policy without notice. In this respect, the trial judge obviously determined that the testimony of the Leuellens and Shepard was worthy of belief. Ownership testimony was based primarily on the oral transactions with which only the Leuellens and Shepard were familiar. We concede, as plaintiff claims, that there is room for doubt as to the veracity of testimony in interfamily dealings, such as evolved in this case. However, unless the decision rendered by a court, sitting without a jury, is clearly wrong, we will not upset its factual determination. It is the province of the trial judge, hearing the case without a jury, to determine the credibility of the witnesses and the weight to be given their testimony, and his judgment will not be disturbed unless manifestly contrary to the weight of the evidence. Hall v. Illinois Nat. Ins. Co., 34 Ill App2d 167, 173, 180 NE2d 695 (1962). If substantially true, the testimony of the Leuellens and Shepard provides a sufficient factual basis for the court to decide that the 1962 Ford falls within the “newly acquired” provision of the contract.

Plaintiff argues that the evidence clearly discloses that the ownership of the 1962 Ford remained in the Leuellens at all times and was therefore not a “newly acquired” vehicle. Conversely they argue that the evidence shows that title to the 1957 Ford remained in Shepard at all times, disputing the validity of the claimed transfers. Plaintiff deems the fact that the registered title to the 1957 Ford always remained in Shepard while the registered title to the 1962 Ford always remained in the Leuellens to be conclusive under the circumstances.

The case of General Acc. Fire & Life Assur. Corp., Ltd. v. Lindenmier, 16 Ill App2d 585, 149 NE2d 343 (1958), dealt with a gift of a vehicle by father to son. Therein the insurer contended that the evidence was naught but a family story of convenience. Because we believe that decision parallels the instant case, we will review the case briefly.

Lindenmier, Jr. insured a 1948 Ford for a period from August 10, 1954, to August 10, 1955. His father, with whom he resided, owned two cars, one a 1950 BelAir. In July, 1954, the 1948 Ford had “conked out” and Jr. stored it in his father’s backyard. On December 2, 1954, the father gave his son the 1950 BelAir, and on December 18, 1954, Lindenmier, Jr. was involved in an accident with the BelAir. The certificate of title to the Chevrolet on the date of the gift was in the possession of the local finance company which held the lien. This was the explanation given for failure of the father at that time to assign the title to the son. Further, the father testified there was a loan on the car and that his son was to pay off this loan by making payments to the father and the father, in turn, was to pay the money to the finance company which held the lien on the car.

The trial court held that there had been a gift of the BelAir by father to son on December 2, 1954, and that, regardless of the fact that the first notice to the insurer of accident and/or request to transfer coverage from the 1948 Ford to the 1950 BelAir was on December 20, 1954, nonetheless, the 30-day period of automatic coverage applied if there had been an actual gift with intent to pass title.

In determining whether a gift has actually been made, the court recognized the controlling fact to be the delivery of the subject matter of the gift by the donor to the donee with the intent to pass title. (Citing Rothwell v. Taylor, 303 Ill 226, 135 NE 419; Estate of Williams v. Tuch, 313 Ill App 230, 39 NE2d 695.) The appellate tribunal decided there was sufficient evidence to warrant the trial court finding that this gift had passed title to the car.

To the same effect is the holding in Mullen v. Farm Bureau of LaSalle County, 21 Ill App2d 280, 285, 157 NE2d 679 (1959), wherein the court states:

“The time of passing of title of an automobile sold is a question of the intention of the parties, . . . and in regard to the sale of personal property the title is transferred from the seller to the buyer at such time as the parties to the contract intend it to be transferred, . . . .”

We feel there was sufficient evidence before the trial court to manifest the intent of the Leuellens to transfer title to the 1957 Ford to Shepard on February 4, 1965. The delivery of the vehicles plus Leuellen’s transfer of coverage bespeaks their intention, and rather than detracting from Leuellens’ position, we feel the application for coverage supports his contention that they had owned the 1957 Ford on that date.

The evidence in this record as to the ownership of the 1962 Ford is not without conflict. Nonetheless, the trial judge must look to all indicia of ownership, and the registry of title is not conclusive.

“To ascertain the true owner of the vehicle it is not sufficient to discover who is the registered owner.” Government Employees Ins. Co. v. Dennis, 65 Ill App2d 365, 372, 212 NE2d 759 (1965).

Later, when the parties saw fit to rescind the transaction, there was a sufficient basis in the evidence for the trier of fact to conclude that the Leuellens repurchased the 1962 Ford on April 12,1964.

We have found no case which deals with the precise problem of whether, during a specific policy period, ownership of an uninsured second car may be divested and thereafter reacquired, so as to construe the vehicle to be a “newly acquired” car within the meaning of the insurance contract.

Although the caption of the subject paragraph of the policy employs the words “newly purchased” automobiles, the terms of the contract recite:

“If the automobile described in the Declarations is disposed of and another acquired in its place by the Named Insured, this policy shall without notice transfer to the newly acquired automobile. . . .”

As stated in Thompson v. State Automobile Mut. Ins. Co., 122 W Va 551, 11 SE2d 849, at page 852 (1940):

“. . . A caption should never of itself be taken to override the intention of the parties to an insurance policy as shown by the provisions and clauses inserted thereunder. . . .”

We therefore consider this matter in the light of the word “acquired.”

Virtually all cases on this point hold that “acquisition” must occur during the policy period. A leading case on point, Lynam v. Employers’ Liability Assur. Corp. (DC Del 1963, 218 F Supp 383, contains a comprehensive survey of the authorities, and holds at page 385:

“. . . The only times when a vehicle may come within the Newly Acquired Automobile Clause are (1) when a vehicle is acquired which in fact is a replacement and the owner discards the old vehicle, (2) when the old vehicle is retained but is not in working condition. The new vehicle must also be acquired after the issuance of the policy.”

(“Discard” and “Dispose” are used interchangeably. See Kelly v. State Farm Mut. Automobile Ins. Co., 256 F Supp 978, 981 (1966).)

Concededly, many cases hold that a vehicle already owned by the insured before the policy was issued is not “newly acquired” under that provision. See Marquez v. Dairyland Mut. Ins. Co., 78 NM 269, 430 P2d 766, 768 (1967); 12 Couch, Insurance, §45:193 (2nd Ed 1964). However, without exception, we have found in each reported instance that the insured owned the car prior to the commencement of the policy period, and up to the date it replaced the insured vehicle.

The facts of the instant case are unique in that the named insured, during a single-policy period, held three distinct positions with respect to this car. They owned it as of December, 1964, divested themselves of legal ownership and possession in February, 1965, and again became its owners according to the finding of the trial court in April, 1965, in turn disposing of the 1957 Ford. We hold this determination was adequately supported by the evidence in the record. Conflicting interpretations may be drawn, but as we have indicated, we rely upon the trial judge to rule upon the evidence which is credibly presented, and, unless he is patently wrong, we will not disturb his findings. Nor can we perceive any valid reason to limit the term “acquisition” to a vehicle which had never been previously owned.

IV

Accordingly, we hold that Country Mutual’s policy of insurance covered the admitted permittee, Shepard, on April 24, 1965, when he was driving the 1962 Ford then owned by Leuellen. We further hold that the trial court could properly have found from the evidence that the Leuellens had acquired this vehicle approximately 12 days earlier, as replacement for the 1957 Ford which had been the vehicle insured under the said policy.

We therefore affirm the decision of the trial court which (a) obliges Country Mutual to provide coverage to Charles Shepard as respects the Donald Murray, Jr. accident, (b) entered judgment in favor of Lucille V. Leonardson and against Country Mutual Insurance Company for $25,000 and costs and interest to satisfy the verdict entered in the case of William Leuellen and Ila Leuellen v. Charles Shepard, Jr., (c) entered judgment in favor of William Luellen and Ila Leuellen and against Country Mutual Insurance Company for $3,168.35, being the amount due under medical pay coverage, plus costs of suit. While, as we have previously stated, the trial court should have granted the summary judgment in behalf of these parties, the result of the declaratory judgment makes this failure of no effect as to the ultimate rights of the parties.

V

We deny the motion of William Leuellen and Ila Leuellen seeking reimbursement for printing costs occasioned by the appeal, as we are of the opinion that the abstract prepared by the appellant both adequately and fairly presented the record to be considered on appeal.

VI

Lastly, counterplaintiff Shepard sued for the attorney’s fees incurred in the defense of the Leonardson common-law action. On the premise that this application for fees was governed by Ill Rev Stats 1965, c 73, § 767, the trial judge found Country Mutual’s declination and denial to not be vexatious. Accordingly, he denied the prayer for fees. We agree that the insurer’s actions were not vexatious but we believe the premise upon which the ruling was based to be erroneous.

The obligation to defend, in view of our holding above, carries with it the concomitant duty to compensate the insured for all damages, including costs of defense he was forced to incur when the facts ultimately establish the company’s duty to defend. Gould v. Country Mut. Cas. Co., 37 Ill App2d 265, 289-290, 185 NE2d 603 (1962); Freed v. Travelers, 300 F2d 395, 399 (CA 7th, 1962). This is based on breach of insurer’s contractual duties and is an entirely different obligation than that imposed by section 767, supra.

That part of the judgment order denying Shepard fees and costs incurred in the defense of the common law action of Leonardson against Shepard, is reversed and remanded for a hearing to determine the amount of said fees and costs. This amount is limited to the defense of the common-law action, and does not include fees for vexatious delay nor such fees as were incurred in the prosecution of the declaratory judgment defense and counterclaim, nor in this appeal.

Affirmed in part, reversed in part, and remanded with directions.

DAVIS and MORAN, JJ., concur.


source: Caselaw Access Project

author: PRESIDING JUSTICE ABRAHAMSON.

license: Public Domain

text:
    Gary Shanholtzer and Patricia Shanholtzer, His Wife, Plaintiffs-Appellants, v. Edward McDaniel, d/b/a Mac Realty and Insurance, Defendant-Appellee.
    Gen. No. 68-23.
    Second District.
    August 2, 1968.

      Runyard, Behanna, Conzelman, Schultz & O’Meara, of Waukegan (John E. Schultz, of counsel), for appellants; no brief filed or appearance made in behalf of appellee.
   Opinion by

PRESIDING JUSTICE ABRAHAMSON.

Not to be published in full.


author: TRAPP, J.

text:
    Melvin State Bank, an Illinois Banking Corporation, Plaintiff-Appellee, v. Merwin E. Crowe and Alice Wisthuff and Frederick Drake, Defendants, Merwin E. Crowe, Defendant-Appellant. Melvin State Bank, an Illinois Banking Corporation, Plaintiff-Appellee, v. Merwin E. Crowe and Alice Wisthuff and Frederick Drake, Defendants, Alice Wisthuff, Defendant-Appellant.
    Gen. Nos. 10,906, 10,913. (Consolidated.)
    Fourth District.
    August 8, 1968.

      Hagin Harper, of Champaign (Kenneth E. Baughman, of counsel), and Fellheimer & Vicars and Walter L. Stodd, of Pontiac, for appellant.
    Martensen & Martensen, of Paxton, for appellee.
   TRAPP, J.

Alice Wisthuff appeals from the several judgments entered, after jury verdicts, as follows: (1) the sum of $16,923.75 in favor of the Melvin State Bank (hereinafter called Bank), and against Merwin E. Crowe and Alice Wisthuff on a judgment note for $15,000, dated January 23, 1964; (2) against Alice Wisthuff, as counterplaintiff, and in favor of the Bank as counterdefendant, on a counterclaim for $10,000 and (3) against Alice Wisthuff, as plaintiff, and in favor of Frederick Drake, as defendant, on the former’s third-party complaint for damages and punitive damages totaling $45,000.

Merwin E. Crowe, a third-party defendant, appeals a judgment, after jury verdict, in favor of Alice Wisthuff, third-party plaintiff, in the sum of $15,000.

Third-party defendant, Merwin E. Crowe, contends that he is entitled to judgment in his favor notwithstanding the verdict, and in the alternative that he is entitled to a new trial because of improper instructions and the introduction of improper evidence.

While one of the briefs designates Drake as an appellee, no brief appears to have been filed on his behalf.

A general statement of the relation of the parties is necessary to an understanding of their contentions, and the detailed evidence which tends to support the various contentions.

Crowe operated a business under the corporate name of Meca Magnetics and, over a period of time, had become increasingly indebted to the Melvin State Bank upon unsecured loans until, at the time of the pertinent transactions in November of 1963, he was indebted to the Bank in the sum of $19,580.26. Frederick D. Drake was executive vice president and cashier and, for practical purposes, the day-to-day managing officer of the Melvin State Bank. Alice Wisthuff, who had been a part-time employee of Crowe, was sent by Crowe to Drake to obtain information regarding Crowe’s business preliminary to having her make a loan to, or an investment in the business. After consulting with Drake, Alice Wisthuff first brought $10,366.38 to Drake at the Bank. At some time she received a note for $10,000, payable in five years, signed by Crowe and his wife. Of Mrs. Wisthuff’s money, $4,580.26 was applied to Crowe’s bank loan, and the balance was credited to his checking account. About one month after the first transaction Crowe signed a thirty-day note at the Bank for the $15,000 balance he owed the Bank. Four or five days later Drake came to Crowe’s Meca Magnetics factory, where Alice Wisthuff was again employed, and obtained her signature on the Crowe $15,000 note, and apparently on other papers. On January 23, 1964, the thirty-day note having matured, Crowe obtained Mrs. Wisthuff’s signature on his sixty-day renewal note of $15,000 in favor of the Bank.

The Bank took judgment on the latter note on January 23, 1964. Alice Wisthuff caused the judgment to be opened and answered the complaint denying the consideration, and alleging fraudulent representation by the Bank’s agent as to the paper she was signing. She also counterclaimed for $10,000, alleging that the Bank’s agent represented that Meca Magnetics had a net worth of $89,000, when its net worth was nil. She filed a third-party complaint against Merwin E. Crowe, her employer, and Frederick D. Drake, as agent of the Bank, alleging fraudulent representation, and the breach of a fiduciary relation.

The record discloses a fundamental confusion in the different principles of law applied in the several aspects of the case. Thus, the investment of $10,366.80 by Alice Wisthuff in Meca Magnetics presents one aspect of the case as to the fraudulent representation alleged, and as to the question of the scope of authority of Drake as executive, vice president and agent of the Bank, whereas the obtaining of the signature of Alice Wisthuff on the $15,000 note of December 17, 1963, first executed by Crowe and the substitution therefor of the $15,000 note of January 23, 1964, presents an entirely different aspect of the case. It is noted, by way of illustration, that plaintiff’s given Instruction No. 19 states that one of the questions for the jury is whether Drake was acting within the scope of his authority. No distinction is made as to the two aspects of the case. It is obvious, however, that two different transactions are involved, — obtaining the $10,366.38 of Alice Wisthuff’s money on November 14, 1963, and obtaining Alice Wisthuff’s signature on Crowe’s previously executed note to the Bank of December 17, 1963, on December 23, 1963. There may well have been a question concerning Drake’s authority to recommend an investment as agent of the Bank. There is no question whatever that Drake was acting within the scope of his authority when he attempted to obtain additional security on a note of a Bank customer which was of doubtful value. It is noted that plaintiff’s given Instruction No. 24 refers to the scope of the authority of Drake “at the time of the occurrence.” As stated, there were at least two different occurrences, and there were alleged misrepresentations of an entirely different nature on the two occasions.

Again, the personal liability of Drake, by reason of using his position in the Bank to carry out directions of Crowe in giving information to Alice Wisthuff, is entirely separate and apart from the liability of the Bank. Even in respect to obtaining Alice Wisthuff’s signature on the Crowe note to the Bank, Drake’s responsibility for false representation may be separate and apart from the liability of the Bank in respect to this transaction. This would be clearly illustrated if the Bank had negotiated the note.

Finally, if the issue of confidential relationship were resolved by the jury in favor of Alice Wisthuff, the consequences concerning the burden of proof would be entirely different, and the numerous instructions regarding the requirements for proof of fraud and deceit set forth in nine of plaintiff’s given instructions would be entirely inapplicable.

The specific failure to give proper instructions complained of by Alice Wisthuff is the failure to instruct upon the effect of a confidential relationship, if found. Further specific complaint is made that there is no evidence to support the judgment against Alice Wisthuff, and that the other judgments and verdicts adverse to her are against the manifest weight of the evidence. A review of the evidence is therefore necessary.

Alice Wisthuff’s age is not set forth. She was married to a man 87 years old who was ill and did not participate in the transaction. She and her husband had farmed near Melvin, Illinois, and then moved to Gibson City in 1940. She and her husband had done some banking at the Melvin State Bank when they were farming near Melvin. She had an eighth-grade education. She worked from time to time to help out with family finances. At first she worked in a canning factory. She worked in a sewing factory for a while. Later she worked for James Electronics, which became Meca Magnetics. She worked as a bobbin winder. She had known Crowe when he was a salesman for James Electronics.

She had worked at Meca Magnetics in the Spring of 1963, but was not working there in November of 1963. She was taking care of her husband, who was ill. In none of her employment had Alice Wisthuff done any bookwork or office work. She was not familiar with financial arrangements. The Wisthuff’s adopted son had died and she had collected something over $10,000 in insurance, which she had placed in savings and loan associations.

On November 13, 1963, Alice Wisthuff received a telephone call from Crowe, who asked her to come to his office, and she did. She testified that Crowe told her the Bank had talked him into selling some shares in the company. He asked her to go to the Bank that afternoon, and said that he gave the Bank permission to show her his records. She went to the Bank about 2 o’clock that afternoon. She testified that Frederick Drake showed her a bank statement and said how much it had gained in the past; that he showed her a paper and said the company was worth $89,000, that it would be a good investment for her, and she would get six percent on her money. She testified that she told Drake that she had some insurance money from her son’s death, that she didn’t want to lose it and she wanted a straight deal. She said Drake asked her if she could have the money the next day.

On November 14, 1963, Mrs. Wisthuff returned to the Bank with two building and loan checks — one for $5,000 and one for $5,366.38. She endorsed the checks in blank. She states that she received papers from Drake, who said she would have part ownership in the factory. The papers included a stock certificate of Meca Magnetics, Inc., for 1,000 shares of $10 par value stock in the name of Merwin E. Crowe, which was dated October 30, 1962, and was not endorsed; a blank stock assignment separate from the certificate signed by Crowe, undated and with no stock named therein; and a memorandum concerning Meca Magnetics, Inc., to Fred Drake from Merwin E. Crowe under date of November 12, 1962, as follows:

“The attached stock certificate #4 for 1,000 shares (par value $10.00 ea.) to Merwin E. Crowe; is hereby to be used to secure a ‘loan’ to provide additional capital for Meca Magnetics, Ine./This in no way transfers title of this stock certificate No. 4. . . .”

A fourth document delivered was a judgment note for $10,000, dated November 14, 1963, payable to the order of Alice Wisthuff with interest at 6% per annum due five years after date, signed by Crowe. The note contained this clause:

“Interest payable semi annually with $2,000.00 payment privilege each anniversary date of note. Payment need not be made if maker prefers not to make it until due date of note.”

Alice Wisthuff testified that she did not read the papers.

The several documents which Alice Wisthuff received had apparently been in Crowe’s file at the Bank for a year. The file also contained some financial statements headed Meca Magnetics, Inc. One statement purported to show a net profit of $14,334.46 for an eight-month period ending May 31, 1963. Another purported to show a net worth as of June 11, 1962, of $15,781.49. Another purported to show a net worth of $60,729.90 as of December 31, 1962. Another statement, dated September 30, 1963, showed a net worth of $49,692.03.

Frederick D. Drake was executive vice president of the Melvin State Bank from 1959 until February 8, 1964. Leroy P. Arends was president of the Bank, but did not spend regular hours there. He would frequent the Bank at his leisure. As far as day-to-day operation was concerned, Drake was the manager in charge. Drake had a Ph.D. from Wesleyan and a Master of Education from Illinois State University. He was a bank examiner for the State of Illinois from 1955 to 1959. He was familiar with Crowe’s business to the extent that he was in the place of business five to ten times prior to November 13, 1963. On some occasion prior to November, 1963, Drake had gone to Chicago with Crowe to consult the Small Business Administration about a loan. He states that he doesn’t know whether Crowe ever got the Small Business Administration loan. He recalls that they did take some financial statements to Chicago.

Nothing short of a detailed chronological review of Drake’s testimony can put the transactions in the proper perspective.

Drake testified that on November 13, 1963, Crowe called him and said that an employee was coming down to talk to him concerning Crowe’s borrowing. Crowe told Drake to disclose to her anything she desired concerning the operation and asked Drake to make an open book of Crowe’s operation. When asked if he could recall the discussion with Alice Wisthuff in the back room of the Bank in particular, he said: “I showed her Mr. Crowe’s file just as you showed it to the jury a little bit ago.” He also said, “I handed them to her similar to the way they were handed to the people in the jury box. I handed her the file and she could go through it and look at anything she wished because Mr. Crowe told me to allow her to do this.” (Abst. p 2.)

Drake was asked if he had known Mrs. Wisthuff before he saw her that day in the Bank and states: “I had never seen her or heard of her.” He was asked whether he could recall the discussion that took place with Mrs. Wisthuff, and he replied, “Not in particular.” He was asked:

“Q. Did you give her any information whatsoever concerning Mr. Crowe’s assets or his accounts?”, and he replied:
“A. I showed her Mr. Crowe’s file just as you showed it to the jury a little bit ago.”
He was asked:
“Q. Here is Exhibit No. 2 of Mrs. Wisthuff’s, this one here is without signature, (financial statement.) Did you show this to Mrs. Wisthuff and point out any figures to her on this instrument ?”, and he answered:
“A. I showed her the complete file and if it was in the file at that time she saw it.”
He was asked:
“Q. I am asking for the details and facts of what you did in detail ?”, and he answered:
“A. I handed her the Gibson Meca Magnetics file which was Merwin Crowe’s business in the bank and said this was all of the information Melvin State Bank had on Mr. Crowe at that time, and I also would have told her at that time any indebtedness he would have had I would have told her.”
He was asked:
“Q. Did you show her any notes or papers other than what we have here today?”, and he answered:
“A. I don’t remember showing her any papers other than what Mr. Crowe had in the file.”
He was then asked:
“Q. And in this period of time — in other words, I am summarizing from what I understand from you. If I am wrong, tell me. There was a brief introduction, she came in and sat down and she didn’t ask you anything, you simply got the file, laid it in front of her and she got up and left?”
His answer was:
“A. I don’t think the introduction was quite that briefly done because I attempted to be friendly with a person coming in the bank, especially one I didn’t know, and we spent some time on general conversation before we even started to discuss Meca Magnetics in any way, and when she did discuss Meca Magnetics with me it was at that time I got the file and I said ‘This is the information you are going to need.’ ”

Drake stated that he did not know what he told Mrs. Wisthuff on November 13, 1963, that might cause her to get the $10,366.38 out of her building and loan account and bring it to the Bank on November 14, 1963. When Mrs. Wisthuff brought the money in on November 14, 1963, Drake believes he may have given her the stock certificate, blank assignment and memorandum herein-before described. On that day he says that he explained to her that he had gained some notoriety from the Bloomington Pantagraph when a customer of the bank claimed he had defrauded him, and he didn’t want this to happen again, and there was a great deal of similarity and he wanted her to sign the paper which he then obtained. The paper on Melvin State Bank stationery is, undated, as follows:

“To Whom It May Concern:
“I, Alice Wisthuff, of my own free will and accord did on November 14, 1963, loan to Merwin E. Crowe ten thousand dollars $10,000, taking as collateral Meca Magnetic, Incorporated stock, and do not hold the Melvin State Bank or any of its officers responsible for this transaction.”
Two women employees of the Bank signed as witnesses.
On the separate subject of Crowe’s status with the Bank at the time of the first two meetings between Drake and Alice Wisthuff, Drake was asked in the original examination:
“Q. Had you investigated his wealth to know what he had; what it was worth ?”, and he answered:
“A. I was satisfied.”
He also said:
“A. I had made the loan to Merwin Crowe and I thought the loan was worth — that he was worth financially enough to bear the burden of the loan.”, and:
“A. I based it on Merwin Crowe, his statement, any figures he might have brought in the bank.”
Drake was asked to check the minutes of the Board of Directors to see whether any mention had been made of Crowe’s defaulted note. He found no record in the minutes. He was asked:
“Q. You have already said in the board meeting you did talk about this account though?”
He answered:
“A. I am not sure I said we talked about him. I don’t remember that I said we talked about him.
I am positive that we must have talked about every note that was ever made in the bank.”

Up to this point, Drake who had never previously seen Mrs. Wisthuff, met her one afternoon after a phone call from her employer in the morning and met her the next day to receive the money she brought in, but had no particular recollection of any conversation about Crowe’s bank debt in reference to which he was satisfied. However, he gave the following testimony:

“A. There may have been one article of conversation that hasn’t been mentioned. When I told the directors of Mrs. Wisthuff and her coming into the bank, one of the directors said he thought she possibly could be related to him, and I may have asked her this that day because I was curious of the relationship and I didn’t know what came of it.”

Drake’s testimony then abruptly turns into an account of a transaction that was not at first mentioned in his testimony. He had testified that he simply handed the file to Mrs. Wisthuff for examination to see whether she would make an investment, that he was thoroughly satisfied with Crowe’s ability to pay, that there had been no particular conversation with the bank directors about the status of the Crowe loan, that he had carefully taken a release only as to an investment to be made by Mrs. Wist-huff, and that he remembered only one item of conversation that had not been mentioned. Drake then said:

“We had taken at the time Mrs. Wisthuff had come into the bank a financial statement from her telling us of her value; her net worth. She listed the assets she had and we accepted that as her statement because we asked her to sign a guarantee agreement she would support Merwin Crowe’s note at the bank and she signed the guarantee agreement.
When the directors at the bank were informed at an informal meeting the president of the bank reminded me that the Federal Deposit Insurance deposit examiner, Mr. Chuck Lee, did not particularly appreciate the signing of guarantee agreements and there was no difference in signing a guarantee agreement in my opinion other than the difficulty of often convincing the bank examiner of this being a difficulty so I said I didn’t think it makes any difference. I said that to Mr. Lee and also to Mr. Arends, but since Mr. Lee thought it would be better if we had people co-sign notes, to put their name on the note, I then at that time took the note in the Melvin State Bank of Merwin Crowe down to the Meca Magnetics shop where Mrs. Wisthuff and Mr. Crowe were working, and we waited until after the business hours of the shop were closed and we were there by ourselves and I asked her at that time to write her name on the note itself telling her that she had already signed the guarantee agreement and that it was in sum and substance the same thing and she signed the note.” (Emphasis supplied.)

The foregoing suggests the first recognition by the witness of two facts, to wit: That there is no real connection between Mrs. Wisthuff’s making an investment of $10,366.38, and signing a note for $15,000 to the Bank, and that at the risk of blowing out of the water the previous testimony of no concern about Crowe’s financial status, some explanation was going to have to be given for signing the thirty-day judgment note for $15,000. Thus, it was necessary to reconstruct the interview when he first met Alice Wisthuff to cover two subjects instead of one — that is, investment and loan guarantee instead of just investment.

The testimony of certain directors which follows immediately in the trial may perhaps explain the abandonment of the stand of complete satisfaction with Crowe’s ability to pay the loan. George Dodd, a director of the Bank, testified that Crowe’s account was discussed by the Board in the fall of 1963. He said, “We was a little leary of the note being paid. He hadn’t been paying.” He said it was discussed at more than one Board meeting. The Board, more or less, left it up to Fred Drake and Jim Arnold what was to be done. Carl Weber, a director, testified that the Board wanted more security on the note, and Fred Drake was asked to get more security on the note.

Just as Drake’s statement that he was satisfied that Crowe could pay the loan, and his statement that there was no special attention given by the Board to the Crowe note was totally contradicted by the testimony of Board members, so was his statement that Alice Wisthuff had signed a loan guarantee agreement previous to his obtaining her signature on the note totally contradicted by documentary evidence.

The next time that Drake saw Alice Wisthuff after he took her money for the loan to Crowe, on November 14, 1963, was on December 23, 1963, when he went out to the factory of Meca Magnetics, after business hours, and saw her, first with Crowe and then alone. The only loan guarantee agreement Alice Wisthuff signed was on December 23, 1963, on the same occasion when Drake obtained her cosignature on the note.

Mrs. Wisthuff says that Drake did not tell her she was signing a note on December 23, 1963, but some papers necessary to transfer Meca Magnetics account to a Chicago Bank. Drake says he told her to sign the note because she was already obligated on a guarantee agreement, which was not true, and he had to know it was not true. On this occasion Drake, in attempting to get additional security on the Bank note, was acting as the Bank’s agent, as a matter of law.

It thus appears that there was no consideration for Mrs. Wisthuff to cosign the December 17, 1963, note of Crowe for $15,000 in favor of the Melvin State Bank. There are only two versions of this transaction. If Mrs. Wisthuff’s version were true there would be fraud in the execution of a note which was palmed off as a different kind of transaction. If Drake represented to her that she must sign because she was already obligated by signed loan guarantee, this was a fraudulent representation which would invalidate her signature for the reason that he was acting as agent of the Bank in obtaining this signature for additional security.

Even if Mrs. Wisthuff had made some oral statement that she would back up Crowe’s obligation, this would be an unenforceable promise, both by reason of the Statute of Frauds and the indefinite nature of the statement. It is conceded that the Bank had already extended the thirty-day credit to Crowe on December 17, 1963, when he signed the note. No new detriment or change of position was taken by the Bank as a result of adding Alice Wisthuff’s signature.

The Bank’s position that only fraud in the execution and not fraud in the inducement will avoid an instrument where a person has a full opportunity to read the instrument is not tenable here. First, it is a complete answer that a false representation as to a nonexistent prior obligation will not create such an obligation and thus supply a consideration. Second, such a false representation by an experienced banker, possibly in the presence of an employer, is calculated to disarm an inexperienced person. Third, it affirmatively appears that the judgment note was not explained to Alice Wisthuff. Fourth, it is obvious that she did not understand the matter of the guarantee agreement because she signed it on an occasion when the banker told her she had already signed it. The note of January 23, 1964, was simply a renewal of the December 17, 1963 note, and stands upon the same footing.

Upon such premises, Plaintiff’s Instruction No. 8 with regard to extension of credit as consideration is inapplicable for the reason that the credit had already been extended in exact terms when she was asked to sign.

The judgment in favor of the Melvin State Bank against Alice Wisthuff in the sum of $16,923.75 must be reversed for the reason that the Bank failed to prove consideration for the cosignature.

We arrive at the issues on Alice Wisthuff’s counterclaim against the Bank, and her third-party complaint against Merwin E. Crowe and Frederick D. Drake. Under the facts hereinbefore recited, we note the fact that Alice Wisthuff was sent by her employer, Crowe, to get correct information regarding the soundness of an investment from an agent of the Bank, and we consider that the agent of the Bank agreed to participate in furnishing this information. It is apparent that the Bank itself stood to gain by reducing a bad loan by reason of the “investment,” if made, and, considering the educational background of the respective parties, we find there was evidence from which the jury could have found that Crowe and Drake, individually and in concert, occupied a confidential relationship to Alice Wisthuff. In re Estate of Bichl, 65 Ill App2d 3, 213 NE2d 83; McCartney v. McCartney, 8 Ill2d 494, 134 NE2d 789; Oster v. Oster, 414 Ill 470, 111 NE2d 319; Stephenson v. Kulichek, 410 Ill 139, 101 NE2d 542. In Lipscomb v. Allen, 298 Ill 537 on p 544, 132 NE 206, the Supreme Court of Illinois quoted the following with approval:

“ ‘The term fiduciary or confidential relation, as used in this connection, is a very broad one. It has been said that it exists, and that relief is granted, in all cases in which influence has been acquired and abused, — in which confidence has been reposed and betrayed. The origin of the confidence and the source of the influence are immaterial. The rule embraces both technical fiduciary relations and those informal relations which exist whenever one man trusts in and relies upon another. The only question is, does such a relation in fact exist ?’ (Mayrand v. Mayrand, 194 Ill 45.). ‘It is settled by the overwhelming weight of authority that the principle extends to every possible case in which a fiduciary relation exists as a fact, in which there is confidence reposed on one side and the resulting superiority and influence on the other. The relation and the duties involved in it need not be legal. It may be moral, social, domestic or merely personal.’ (2 Pomeroy’s Eq Jur — 3d ed— sec 956.)”

The court gave an instruction stating what might constitute a fiduciary relationship, but gave no instruction as to the effect of a fiduciary or confidential relationship if found to exist. Where the confidential relationship is shown to exist, the burden of proving good faith and proving a free and frank disclosure of all relevant information, and that consideration for the transaction is adequate, is imposed upon the person or persons in whom the confidence or trust is reposed. In re Estate of Bichl, 65 Ill App2d 3, 213 NE2d 83. We believe that Mrs. Wisthuff’s tendered Instruction No. 4 fairly presented this principle and that the jury should have had an instruction, or instructions, stating the legal results that would follow if a confidential relationship were found. Certainly if a confidential relationship were found to exist, the strict principles applicable to proof of fraud and deceit, as exemplified in plaintiff’s given instructions on the elements and proof of fraud, would not apply. A person who abuses a confidential relation is liable for the consequences of that abuse.

The Bank contends that this Court is conclusively bound by the finding of the jury to a special interrogatory, the giving of which was not objected to nor raised as an issue at the post-trial motion:

“Did Frederick Drake make to Alice Wisthuff false and fraudulent representations as defined in and by the instructions of this Court?”

The jury answered the interrogatory in the negative.

This interrogatory presents obvious difficulties in its cross reference to the body of the instructions and its lack of specificity. The evidence raised separate issues as to representations made concerning the stock transaction and concerning the signing of the note. There is evidence under distinctly pleaded theories of fraud and fiduciary relation. Plaintiff’s set of given instructions relating to fraudulent representations directed the attention of the jury only to the stock transaction. Under such circumstances the finding is not substantially conclusive of all the facts upon which the issue of liability depends. Forslund v. Chicago Transit Authority, 9 Ill App2d 290, 132 NE2d 801.

Perhaps, more significant is that the answer to the interrogatory is incorrect. By his own statement Drake told Alice Wisthuff that she might as well sign the judgment because she had previously signed a loan guarantee agreement for Crowe’s bank obligations. This was false. This Court is bound to give great weight to a jury’s finding on a proper interrogatory, but it is not bound to find contrary to an admitted fact. The only other version of this incident is that of Alice Wisthuff, and this would not help the Bank. Additionally, neither version would supply a consideration that is, in fact, absent.

The judgment in favor of Drake on Alice Wisthuff’s third-party complaint must be reversed and remanded for error in refusing instructions offered by the third-party plaintiff.

The counterdefendant Bank contends that it cannot be responsible for acts of Drake in representing that the investment of $10,366.38 was a good investment, even if he so represented it knowing it to be false, for the reason that such representations would be outside the scope of his authority as an agent of the Bank. While this principle may be correct as to a part of the investment, we think it is not correct insofar as the Bank benefitted from the transaction in the application of $4,580.26 to Crowe’s loan. We think it is clear that in obtaining the money and applying it to the Bank’s loan, Drake, to that extent acted within the scope of his authority as an agent of the Bank.

Upon a new trial the jury should be clearly instructed upon the principles which apply. In the event the jury should find that a confidential relationship did not exist, then the principles of fraud and deceit would apply. If a confidential relationship should be found to exist, then the requirements of full disclosure and adequate consideration and liability for resulting abuse of the relation apply.

We find nothing in the record to justify our disturbing the judgment in favor of Alice Wisthuff against Merwin E. Crowe in the sum of $15,000, for the reason that her damages by reason of his conduct may well have equalled that sum including interest upon her lost investment, and costs of becoming involved in litigation with third parties by reason of the fraud. We do not agree that the record shows that he is clearly free of all participation.

The judgment in favor of Melvin State Bank against Alice Wisthuff in the sum of $16,923.75 is reversed.

The judgment in favor of Alice Wisthuff against Merwin E. Crowe in the sum of $15,000 is affirmed.

The judgment in favor of the Melvin State Bank, and against Alice Wisthuff on her counterclaim, is reversed and remanded for new trial.

The judgment in favor of Frederick D. Drake and against Alice Wisthuff on her third-party complaint is reversed and remanded for new trial.

Reversed and remanded.

SMITH, P. J. and CRAVEN, J., concur.


author: JONES, J.

text:
    Joan Elizabeth Dawson and Michael Stewart Burtle, Plaintiffs-Appellants, v. Ina Mae Yucus, Individually and as Executrix of the Last Will and Testament of Nelle G. Stewart, Deceased, and Hazel Degelow, Defendants-Appellees.
    Gen. No. 10,940.
    Fourth District.
    July 29, 1968.

      Denby & Dobbs, of Carlinville, and Achtenberg, Sandler & Balkin, of Kansas City, Missouri, for appellants.
    Phelps, Russell and Boyle, of Carlinville, for appellees.
   JONES, J.

In this will construction case plaintiffs seek a decree finding Clause Two of the will of Nelle G. Stewart, deceased, is a devise to a class. Plaintiffs appeal a trial court decree rendered for defendants.

Nelle G. Stewart, of Girard, Illinois, died on May 29, 1965, leaving a duly executed will dated March 3, 1959, and containing ten dispositive clauses. The first clause directed payment of debts and funeral expenses. The second clause, the interpretation of which is the sole issue in this case, provided:

“Through the Will of my late husband, Dr. Frank A. Stewart, I received an undivided one-fifth (%) interest in two hundred sixty-one and thirty-eight hundredths (261.38) acres of farm lands located in Sections Twenty-eight (28), Twenty-nine (29), Thirty-two (32) and Thirty-three (33) in Township Fourteen (14) North, Range Four (4) West of the Third Principal Meridian in Sangamon County, Illinois, and believing as I do that those farm lands should go back to my late husband’s side of the house, I therefore give; devise and bequeath my one-fifth (V5) interest in said farm lands as follows: One-half (%) of my interest therein to Stewart Wilson, a nephew, now living in Birmingham, Michigan and One-half (%) of my interest to Gene Burtle, a nephew, now living in Mission, Kansas.”

Clauses three and four made bequests of personalty to Ina Mae Yucus, Lola Eades, Hazel Degelow and Ella Hickey. Clauses five, six and seven made bequests of cash to charities. Clause eight provided for the payment of a reasonable allowance to Ina Mae Yucus or Hazel Degelow should illness make it necessary for the testatrix to live in either of their homes. Clause nine directed the executrix to convert all “the rest, residue and remainder of my property ... of whatever kind and character and wheresoever situate, including void or lapsed legacies . . . into cash . . . and the proceeds divided equally between Ina Mae Yucus and Hazel Degelow, or to the survivor or survivors of them, should any of said named persons predecease me.” Clause ten appoints Ina Mae Yucus executrix and waives bond.

After the will was admitted to probate, Stewart Wilson filed suit to construe the will alleging that the devise in clause two was a class gift, that Gene Burtle, one of the devisees in clause two, died after the date of execution of the will but before the testatrix and that plaintiff, as the survivor of the class, was entitled to the entire one-fifth interest in the farm. After the complaint was filed, Stewart Wilson conveyed the interest he allegedly received as survivor of the class to the two children of the deceased Gene Burtle and they were substituted as plaintiffs. The defendants, the executrix and the beneficiaries named in the residuary clause of the will, filed answer denying that clause two was a gift to a class, asserting that it was a devise to two specific individuals and that upon the death of Gene Burtle prior to that of the testatrix, the gift to him lapsed and passed into the residuary-clause of the will.

At the trial the court found that the death of Gene Burtle prior to that of the testatrix created a latent ambiguity and admitted extrinsic evidence relating to testatrix’ intentions. There is no serious dispute over the facts shown by the evidence presented by plaintiffs. Nelle G. Stewart was the widow of Dr. Frank A. Stewart and received as a devisee in his will a one-fifth interest in a 261-acre farm in Sangamon County. Nelle G. Stewart and Dr. Frank A. Stewart had no children. At the death of Dr. Stewart his surviving blood relatives were Gene Burtle, Stewart Wilson, William C. Stewart and Robert T. Stewart, his nephews and Patti S. Lusby, his niece. Nelle G. Stewart knew all of these relatives of Dr. Stewart. Of these relatives of Dr. Stewart, only Gene Burtle and Stewart Wilson had a close personal relationship with the testatrix. Gene Burtle died on May 15, 1963, and the testatrix knew of his death but made no changes in her previously executed will. There was evidence from four witnesses that in conversations had with testatrix she stated she wanted the one-fifth interest in the farm to go either to her husband’s side of the house, or to Gene Burtle and Stewart Wilson because she felt especially close to them and none other of Dr. Stewart’s relatives had any contact with her.

The trial court held, we think correctly, that clause two of testatrix’ will did not create a class gift and that the gift in that clause to Gene Burtle lapsed and, pursuant to the Illinois Lapse Statute, chapter 3, section 49, IRS 1965, passed into the residue of her estate.

The definition of class gifts and pertinent rules of construction as followed by Illinois courts are set forth in the case of Strohm v. McMullen, 404 Ill 453, 89 NE2d 383:

“The definition of a class gift adopted by this court, as laid down by Mr. Jarman in his work on Wills, Vol 1, P 534, 5th Am Ed, is: ‘A gift to a class is defined ... as a gift of an aggregate sum to a body of persons uncertain in number at the time of the gift, to be ascertained at a future time, and who are all to take in equal or in some other definite proportions, the share of each being dependent for its amount upon the ultimate number of persons.’ Volunteers of America v. Peirce, 267 Ill 406, 108 NE 318; Blackstone v. Althouse, 278 Ill 481,116 NE 154, LRA 1918B, 230; Henry v. Henry, 378 Ill 581, 39 NE2d 18.
“ ‘A class, in its ordinary acceptation, is a number or body of persons with common characteristics or in like circumstances, or having some common attribute, and, as applied to a devise, it is generally understood to mean a number of persons who stand in the same relation to each other or to the testator.’ Blackstone v. Althouse, 278 Ill 481, 116 NE 154, 157, LRA 1918B, 230. And it has been definitely decided in this State that in determining whether a devise is to a class or to individuals depends upon the language of the will. If from such language it appears that the amounts of their shares are uncertain until the devise or bequest takes effect, the beneficiaries will generally be held to take as a class; but where at the time of making the gifts the number of beneficiaries is certain, and the share each is to receive is also certain, and in no way dependent for its amount upon the number who shall survive, it is not a gift to a class, but to the individuals. Volunteers of America v. Peirce, 267 Ill 406, 108 NE 318; Blackstone v. Althouse, 278 Ill 481, 116 NE 154, LRA 1918B; Strauss v. Strauss, 363 Ill 442, 2 NE2d 699, 105 ALR 1386; Henry v. Henry, 378 Ill 581, 39 NE2d 18; Peadro v. Peadro, 400 Ill 482, 81 NE2d 192.
“There is an exception to the rule that naming the individual prevents the gift from becoming a class gift, stated in Strauss v. Strauss, 363 Ill 442, 2 NE2d 699, 105 ALE 1386, holding that the mere fact that the testator mentions by name the individuals who make up the class is not conclusive, and that if the intention to give a right of survivor-ship is collected from the remaining provisions of the will, as applied to the existing facts, such an intention must prevail. This is in accord with the general rule applying to construction of wills, that the intention of the testator, if clearly manifested from the whole will, must prevail over rules of construction. This rule was recognized in the late case of Peadro v. Peadro, 400 Ill 482, 81 NE2d 192, 194, where the gift after a life estate was devised as follows: ‘shall be equally divided, share and share alike, between Earl D. Peadro, Berniece F. Peadro, Eoy F. Peadro and Irtys A. Peadro, or the survivor of them to be their sole and absolute property.’ In that case we held there was no class gift, saying: ‘This court recognizes the rule that a gift to persons named is a gift to them individually and not as a class, and will treat the gift as one to individuals, unless reasons are found in the language and structure of the will for deciding that the intent of the testator, which is, of course, paramount to the rule, would be best subserved by disregarding the rule and treating the gift as one to a class.’ ”

Also, see Eestatement of Property, Future Interests, §§ 279, 280 and 281.

Admittedly the gift in clause two is not made with the usual generic class description such as “children,” “brothers,” “nephews,” “cousins,” “issues,” “decedents,” or “family” but is in fact to two named individuals, conditions which militate against construction of the clause as a class gift. However, plaintiffs argue that because of the death of Gene Burtle prior to that of the testatrix a latent ambiguity exists and extrinsic evidence was properly received to show the true intention of the testatrix in clause two of her will, and that the phrase in clause two, “and believing as I do that these farmlands should go back to my husband’s side of the house,” together with the extrinsic evidence, clearly requires class gift construction.

Plaintiffs rely largely upon the cases of Strauss v. Strauss, supra, and Krog v. Hafka, 413 111 290, 109 NE2d 213. The Strauss case, as quoted above, recognizes the general rule that naming of individuals prevents the gift from becoming a class gift, but holds that merely naming the individuals is not conclusive if the intention to give a right of survivorship is collected from the remaining provisions of the will and the existing facts. In the Krog case, which plaintiffs contend is on all fours with this case, one Frieda Studtmann left a will consisting of four paragraphs. The first paragraph directed payment of debts and funeral expenses; the second made a specific legacy to a church; and the third was as follows: “Third, I hereby give, devise and bequeath to Harry E. Hafka and his wife, Ethel May Hafka, of New Lenox, Illinois, all of my estate both real and personal of every kind and nature whatsoever to have and to hold the same to them and their heirs and assigns forever”; the last paragraph appointed Harry E. Hafka executor. Harry E. Hafka died eight months prior to the death of testatrix. Extrinsic evidence showed that testatrix, a spinster, spent the later part of her life residing on her 170-acre farm; that for approximately seven years prior to her death Harry Hafka and his wife Ethel May Hafka lived with her, operated the farm and furnished extensive care for testatrix, who was under the doctor’s attention for four or five years with a goitre and heart ailment; that the testatrix did not care for her cousins (her only relatives) ; their paths crossed infrequently and she enter-tamed resentment toward them. Testatrix told witnesses she was not interested in leaving her estate to her relatives inasmuch as they had more money than she did; that at her request a nonlawyer friend, eighty years of age, prepared her will and she told him and the witnesses that she was living with the Hafkas, she liked them well, that it was her desire that everything should go to them, that they had agreed to take care of her until she died and to give her a decent burial. She also mentioned her relatives and stated she did not owe them anything, “they are not going to get any of my estate.” Other evidence was that the testatrix told her personal physician that she wanted everything she had to go to the Hafkas for they had taken good care of her. The Supreme Court made an extensive review of the law of latent ambiguity and class gifts and concluded by reciting eight controlling factors that made the conclusion inescapable that Frieda Studtmann intended that all her property was to go to the Hafkas as a class, and that Ethel May Hafka, as the survivor of the class, took the entire residue of the estate.

We think, and hold, that this case is more nearly akin to Strohm v. McMullen, supra, and O’Connell v. Gaffney, 23 Ill2d 611, 179 NE2d 647. The will under consideration in Strohm contained a clause expressly excluding a sister and nephew from any benefits from the testator’s estate. It then gave the residue of the estate to three named persons, share and share alike. Two of the three persons named in the residuary clause predeceased the testator, the third claimed the entire residue as the survivor of a class. The court rejected the class construction and held that:

“The fact that the testator did not want certain relatives to share in his estate does not indicate that he desired the named residuary devisees be clothed with the right of survivorship.
“The sixth clause of the will in this case not only named the individuals who were to take, but also who were to take ‘share and share alike.’ No more precise description of a donee, or of the amount to be given, could be made, leaving no room to construe the individuals into a class so that the survivor of such class would take all the residue.”

The residuary clause of the will considered in the O’Connell case provided, “. . . I direct that one part be paid in equal shares, to my two brothers, James Gaffney and Edward Gaffney of Ireland.” Edward died before the testator. The court held:

“Considering the fact that the instant will devises to two brothers of the testator, who are named, and that they are to take in equal shares, it seems clear that Owen Gaffney was thinking simply of his two brothers then living and not of a person or persons to be ascertained at a future time. In our opinion, nothing appears from the general plan of disposition, or from any special relationship of Owen Gaffney to his two brothers, or from the failure of Owen Gaffney to change his will after the death of Edward to overcome the initial presumption that the gift was to James and Edward as individuals. The gift to the two brothers in equal shares further strengthens this conclusion that a class gift was not intended by the testator.”

In this case the testatrix named the individuals, Stewart Wilson and Gene Burile, and gave them each a one-half portion of her interest in the farm, thus making certain the number of beneficiaries and the share each is to receive. The shares in no way depend upon the number who shall survive the death of the testatrix. There is nothing in the language of the will that indicates the testatrix intended to create a class or survivorship gift. The only other provision of the will, also contained in clause two, that has any bearing on the question is the statement, “. . . believing as I do that those farm lands should go back to my late husband’s side of the house. . . While it is true that this language recites testatrix’ desire that the one-fifth interest in the farm go back to her husband’s side of the house, it does not indicate a survivorship gift was intended. Her intention to return the farm to her husband’s side of the house was fulfilled when she named Stewart Wilson and Gene Burtle as the donees of the interest. And we are not pursuaded that the extrinsic evidence offered by plaintiffs is sufficient to require a finding that the testatrix intended a class or survivorship gift as in the Strauss and Krog cases. There is no evidence which requires, or, in view of the Strohm and O’Connell cases, would even permit, construing this specific devise of equal one-half portions to two named individuals as a class gift.

Further emphasis for the result we have reached is supplied by other factors found in the will and extrinsic evidence. First, the testatrix created a survivorship gift of the residue of her estate in the ninth clause of her will, thus indicating she knew how to manifest an intent to create a class or survivorship gift; hence, the language of clause two, phrased differently, was intended to create a gift to individuals distributively. Restatement of Property, Future Interests, § 280, Comment g, No. 1. Paragraph No. 2 of the same Restatement citation provides, “The specification ... of an exact proportion in the subject matter of the conveyance, which is to be received by each of the named and described persons, is strongly indicative of an intent to make a gift to individuals distributively whenever the . . . proportions so specified equals the entire subject matter given by the limitation in question.” Secondly, the common characteristic of the alleged class described by plaintiffs is that of relation to Dr. Stewart, or, in the words of clause two, the class is of “my late husband’s side of the house.” However, this characteristic is also shared by three other heirs of Dr. Stewart of the same degree of relationship to him as Stewart Wilson and Gene Burtle. It thus appears that Gene Burtle and Stewart Wilson do not constitute the alleged class but are individuals named from the class.

The factors that distinguish the Strauss case from this case were furnished by the Supreme Court in Strohm v. McMullen, supra, where they analyzed the Strauss case and found that the “mentioning of the names of children in the Strauss case was only one of four different ways in which the residuary legatees were designated, the others in themselves being sufficient to bring the donees within a class.” Nor do we feel that the Krog case is “on all fours” with this one. In that case the language found to create a class gift was much different than that used in the instant will, and the testatrix enjoyed a much closer relationship with the Hafkas than that between Mrs. Stewart and Gene Burtle and Stewart Wilson. Extrinsic evidence shows that the “close personal relationship” consisted of friendly visits by the Burtles and Wilsons about every summer when they came from their homes in Michigan and Kansas to visit in Springfield and Girard. In Krog, the testatrix received many years of personal services from the Hafkas and stated upon several occasions that she did not want any of her heirs to have any of her property. Further, few of the controlling factors enumerated by the court in deciding that case are present here. For instance, the always present presumption that the testatrix intended not to die intestate as to any of her property was relied upon in the Krog case, but here no partial intestacy will result from the nonclass construction. Here there is a general testamentary scheme favoring the beneficiaries of the residue of Mrs. Stewart’s estate; namely, Ina Mae Yucus and Hazel Degelow — persons with whom she was obviously on an intimate and friendly basis as shown by the fact that she left them the residue of her estate and, per clause eight of her will, contemplated living in either of their homes.

The devise in clause two was not to persons who come within the designation of a class but was to individuals distributively. It was not so made or limited to prevent the operation of the Illinois Lapse Statute which must be given its intended effect. The court below correctly held that upon the death of Gene Burtle prior to that of the testatrix the devise to him lapsed and passed under the residuary clause of the will. The Decree will be affirmed.

Affirmed.

CRAVEN, Acting P. J. and TRAPP, J., concur.