Bullard v. Turner

• Decision Date: 03 October 1934
• Docket Number: No. 21986.,21986.
• Citation: 357 Ill. 279,192 N.E. 223
• Parties: BULLARD et al. v. TURNER et al. SAME v. STANDARD CHAIR CO. OF PENNSYLVANIA.
• Court: Illinois Supreme Court

357 Ill. 279

192 N.E. 223

BULLARD et al.

v.TURNER et al.

SAME

v.STANDARD CHAIR CO. OF PENNSYLVANIA.

No. 21986.

Supreme Court of Illinois.

June 15, 1934.

Rehearing Denied Oct. 3, 1934.

Bill by Joel E. Bullard, as trustee, and another, against Arthur C. Turner, the Standard Chair Company of Pennsylvania, and others, in which second-named defendant filed a cross-bill, and in which the Union Bank of Chicago was appointed receiver to take charge of mortgaged property. A decree directing a sale of the property and dismissing the cross-bill was reversed by the Appellate Court (269 Ill. App. 369), and the cause remanded, with directions, and the trustee appeals.

Judgment of the Appellate Court reversed, and decree of the Superior Court affirmed.Appeal from Third Branch Appellate Court, First District, on Appeal from Superior Court, Cook County; Robert E. Gentzel, Judge.

Frank E. Hayner, George Gillette, and Elmer M. Leesman, all of Chicago, for appellant.

Helmer, Moulton, Whitman & Holton, of Chicago (Herbert R. Tews, or Chicago, of counsel), for appellee.

DE YOUNG, Justice.

Joel E. Bullard, as trustee and the Maywood Trust & Savings Bank, filed a bill to foreclose a trust deed in the nature of a mortgage in the superior court of Cook county. The defendants were Arthur C. Turner, the Standard Chair Company of Pennsylvania, the Standard Chair Company of Illinois, the Brockton Heel Company, the Chicago Title & Trust Company, as trustee, and J. B. Lewis, trading as the Lewis Electric Company. The Standard Chair Company of Pennsylvania filed a cross-bill claiming priority over the trust deed with respect to the income from a portion of the mortgaged property. Answers to the bill and cross-bill were filed by the parties, except Turner, the Chicago Title & Trust Company as trustee, and the Standard Chair Company of Illinois, whose defaults were recorded. Upon the application of the complainants the Union Bank of Chicago was appointed receiver to take charge of the mortgaged property. The receiver, by its petition, asked that the Brockton Heel Company, a tenant, be required to attorn to it. The tenant answered the petition and upon a reference, a master in chancery heard evidence and made a report in favor of the petitioner. The court entered an order confirming the master's report and directed the tenant to attorn to the receiver. Subsequently the cause was referred to another master in chancery who heard evidence, made a report with findings, and recommended a decree in conformity with the prayer of the bill. A decree of sale was entered, and the cross-bill was dismissed for the want of equity. The Standard Chair Company of Pennsylvania prosecuted an appeal to the Appellate Court for the First District, and that court reversed the decree and remanded the cause, with directions. Upon a certificate of importance, Joel E. Bullard, as trustee, prosecutes this further appeal.

The real estate described in the trust deed is owned by Arthur C. Turner. It consists of nine lots, and is improved by a 4-story brick building known as 123-139 West Forty-Sixth street, Chicago. Turner, who conducted a business by the style of the Standard Chair Company, and later caused it to be incorporated in this state as the Standard Chair Company of Illinois, occupied the east half of the building. On November 28, 1921, he executed a lease of the west half to the Brockton Heel Company for the term from March 1, 1922, to April 30, 1927, with the option to extend the term for an additional period of five years. The option was exercised by the lessee.

On July 1, 1929, the property was incumbered by a first mortgage. Turner, on that day, delivered his promissory note for $7,500, due in two years, with interest at 6 per cent, and executed the trust deed in question to Joel E. Bullard to secure its payment. Prior to that time, Turner became indebted to the Standard Chair Company of Pennsylvania, and, to secure the payment of his indebtedness, assigned to that company, by two instruments dated August 8, 1927, the lease he had made to the Brockton Heel Company and the rental accruing under it. These assignments were not recorded.

The purpose of the petition of the receiver, appointed in pursuance of the provisions of the trust deed, was to require that the rental dervied from the part of the premises occupied by the Brockton Heel Company be paid to the receiver. The Standard Chair Company of Pennsylvania, by its answer to the original bill, its cross-bill and its answer to the petition of the receiver, claimed this rental by virtue of the assignments from Turner, the owner of the property. The Brockton Heel Company averred in its answer that it was notified of the assignments of the lease and the rental in August, 1927, and the evidence shows that thereafter and until the receiver was appointed, the appellee, the Standard Chair Company of Pennsylvania, collected the rent so assigned. The Chicago Title & Trust Company was made trustee in a third mortgage executed by Turner on August 24, 1929, to secure the payment of certain notes held by the appellee. The claim of J. B. Lewis was for a mechanic's lien.

The controversy in this case concerns the right to collect rents during the pendency of the proceeding. The decision of that question depends upon the legal effect of the unrecorded assignments of the lease and the rental without notice of the rights growing out of such assignments other than that afforded by the occupancy of the tenant. The appellant contends that there was no competent proof of the assignments; that even if there were such proof, the possession by the tenant did not give constructive notice of the appellee's claim; that, unless the trustee had actual notice of the assignments, he had the right to assume that no such instruments existed, and that, to constitute notice to the appellant, the assignments should have been recorded. The contentions of the appellee, on the contrary, are that possession of property by a tenant is notice not only of the right, title, and interest of the tenant and of his landlord, but also of the rights of the person to whom the tenant pays rent; that actual notice of the rights of the appellee was not necessary because the possession of tenant was sufficient to put the trustee upon inquiry, the neglect or omission of which nevertheless bound the trustee by whatever facts an inquiry would have disclosed, and that the necessity for...