On January 24, 1923, the plaintiff had not availed himself of his option to purchase the Vail estate, and on that date, by an agreement in writing, gave full and complete possession to the defendants of the real estate described in the deed of September 7, 1922, and agreed that he would operate and care for the property, collecting the rents and paying all bills incurred thereon, except insurance or taxes or assessments against the property, for one-half the gross receipts received by him from the rentals and the income of a storage business conducted upon said property, and that he would deposit to the credit of the defendants each week their half of the total gross receipts.

On October 5, 1923, the plaintiff filed a bill of complaint, seeking to have the deed of September 7, 1922, by which he conveyed the Lynn real estate to the defendants, adjudged and decreed to be void and of no effect, and for further relief.

After hearing the plaintiff's evidence, the judge of the District Court entered a final decree, dismissing this bill of complaint and awarding costs to the defendants, from which decree this appeal has been taken.

The errors assigned are, in substance, that the court erred in not finding that the agreement of August 25, 1922, between the plaintiff and defendants, was void and of no effect, and therefore should be set aside and canceled; in not finding that the defendants fraudulently induced the plaintiff to sign the agreements of September 9, 1922, January 3, 1923, and January 24, 1923, and that by deception and fraud in recording the deed of September 7, 1922, the defendants injured the financial standing of the plaintiff, so that he was unable to meet his obligations to them; in not finding that the defendants delayed and prevented the plaintiff from asserting his rights against the defendants with respect to his Lynn property; in not finding that the defendants defrauded and coerced the plaintiff in obtaining his signature to the agreement of September 9, 1922; and in not finding that the contract of January 3, 1923, was broken by the defendants, and that the plaintiff was thereby released from its conditions and consequences; also that the court erred in not relieving the plaintiff from forfeiture of his property.

Grapes & Manley owned the Lyndonville property as tenants in common, and while the agreement of August 25, 1922, was signed "Grapes & Manley, by J. B. Manley," instead of being signed by each of the tenants in common, Manley testified that he

was authorized by his tenant in common to sign his name to this agreement.

The evidence is uncontradicted that

Grapes ratified this agreement, and, while the question is not now before us, we think there was sufficient evidence upon which both Grapes and Manley could in equity have been held to the performance of this agreement, which the parties all treated as legal and binding upon them.

The facts are within a small compass: The plaintiff, for the purpose of securing an option for the purchase of this large property in Lyndonville, and relying upon his expectation that he would be able to raise sufficient money upon it to enable him to carry out his agreement with the defendants, was willing to convey to them his real estate in Lynn, and to execute thereafter an agreement by which title to the defendants under said deed should become absolute. Having failed to find any party or parties who would, upon the security afforded by the Lyndonville property, loan him the money necessary to carry out his agreement, and the mortgagees holding mortgages upon his Lynn property pressing him for payment, he was compelled to yield full possession to the defendants of his real estate in Lynn.

Because of his disappointed hopes he now seeks a cancellation of the deed which

he gave, on the ground that he was defrauded and deceived.

After a careful study of all the evidence we are unable to find any testimony which supports the charge of fraud or coercion. The agreement with the defendants was entered into in good faith by the plaintiff, and in evident reliance upon his hopes of securing a large loan upon the Lyndonville property when he might acquire it, which would enable him to carry out this agreement. With knowledge that the deed of the Lynn property, dated September 7, 1922, had been recorded by the defendants, in order that he might secure an extension of the option given to him by the defendants, he entered into the agreement of January 3, 1923, by which he agreed that the deed should become absolute on January 25, 1923, and that he would claim no right, title, or interest thereafter in the property thereby conveyed.

He never made any payment to the defendants, and has never received any deed from them, but did receive the option for which he contracted.

No fraud or coercion having been found by the District Court, and none appearing in

Revenue.

(Circuit Court of Appeals, Seventh Circuit. December 11, 1925. Rehearing Denied January 15, 1926.)

No. 3600.

1. Pleading 214(1)-On demurrer, facts stated in declaration taken as pleaded.

On demurrer, facts stated in declaration are taken as pleaded.

29-Pleading

2. Evidence 214(5)—Judicial notice taken of statutes; statement of law in declaration may be disregarded as mere conclusion.

Court takes judicial notice of statutory provisions, and statement of law in declaration demurred to is mere conclusion, which may be disregarded, if erroneous.

3. Municipal corporations 278 (2)-Chicago board of local improvements not charged with duty of originating plans for improvements. Board of local improvements of city of Chicago is not charged with duty of originating plans for local improvements, under Cahill's Stat. Ill. 1921, c. 24, § 129. 4. Eminent domain 168(2)-Condemnation proceedings by city of Chicago not under direction of board of local improvements.

Proceedings for condemnation of property for street improvements in city of Chicago are not under direction of board of local improvements, nor is it authorized to employ persons to prepare assessment roll, in view of Cahill's Stat. Ill. 1921, c. 24, §§ 134–137.

5. Internal revenue 38-Declaration in suit

to recover income tax paid held too indefinite

and uncertain.

Declaration, in suit to recover amount of income tax paid under protest, on ground that income was received for services as instrumentality of state government held too indefinite and uncertain as to work plaintiff was employed to do and did, and whether it was such as to exempt money paid therefor from assessment. 6. Pleading construed

34(4)-Pleadings most strongly against pleader. Pleadings are to be construed most strongly against pleader.

7. Internal revenue 38-Burden on plaintiff, suing to recover income tax paid, to allege facts showing income not subject to tax. Burden was on plaintiff, suing to recover amount of income tax paid under protest, to set forth, by clear and unequivocal averments facts showing that money paid him was not subject

to tax.

In Error to the District Court of the United States for the Eastern Division of the Northern District of Illinois.

Action by Ernest H. Lyons against Mabel G. Reinecke, Collector of Internal Revenue. Demurrer to declaration sustained, and plaintiff brings error. Judgment affirmed.

Albert Fink, of Chicago, Ill., for plaintiff in error.

John R. Wheeler, of Washington, D. C., for defendant in error.

Before EVANS, PAGE, and ANDERSON, Circuit Judges.

PAGE, Circuit Judge. Plaintiff in error, called plaintiff, sues to recover money paid under protest as an income tax, claimed to have been illegally exacted from him for the year 1920. He states, as the basis of his claim, that the income received was for services as an "instrumentality of the government of the state of Illinois in carrying on and performing its functions of government." The question is: Is the declaration obnoxious to a general demurrer?

That

The declaration avers: That the Legislature of the state of Illinois, having the right to do so, created the city of Chicago and a board of local improvements therefor. That all streets and highways in the city of Chicago have been and are laid out, improved, and extended under the authority of the state Legislature. That the streets and highways in all cities of the state are established for the use of all of its inhabitants. the board of local improvements of Chicago was created by the state Legislature, and is charged with the duty of originating plans for local improvements, including the establishment, etc., of streets, to be paid for by special assessments, levied upon the property benefited, or by taxation, or partly by special assessment and partly by general taxation. That proceedings to condemn property for local improvements are conducted under the direction of that board and that it is empowered by the Legislature (a) to employ all persons necessary to do work of condemning

property; (b) to estimate compensation for property damaged and not taken; (c) to institute proceedings to assess property benefited; (d) to prepare assessment rolls; (e) to specify amounts to be paid by general taxation; and (f) to aid in procuring approval of assessment rolls in the courts. That those so employed are to be paid out of taxes levied, assessed, and collected under the laws of Illinois. That said board's general plan of operation is (a) to pass a resolution directing the making of the improvement; (b) its engineer estimates costs; (c) to hold a public hearing; (d) to submit an ordinance therefor to the city council; (e) if and when the ordinance is passed, proceedings for confirmation of the assessment and condemnation are commenced in the courts; (f) if and when favorable judgment is had, contracts are entered into and persons are employed to do the necessary work, under the control and direction of the board. That prior to January 1, 1920, such proceedings were originated and an ordinance passed by the city council for improving and widening numerous streets. That 7,000 pieces of property, owned by 7,000 different persons, were to be condemned and taken, the gross value of which exceeded $65,000,000. That 100,000 separate pieces of property, specially benefited by the improvements, had to be valued. That the city passed an ordinance authorizing the sale of $28,600,000 in bonds, to pay the city's part of the cost of improvements. That, on recommendation of the finance committee of the city council of the city of Chicago, the city council passed an order authorizing the board "to employ the following for such periods of time during 1920 as may be necessary:" Then follows a list of a large number of experts, including, "real estate experts, 4, on the basis of 1 per cent. of the value of property and $50 per day for testifying in court on behalf of the city." That the cost was to be charged to appropriations thereafter made and the comptroller and treasurer were to pass pay rolls for the same, when approved by the president of the board. That before retaining services of certain experts, including the real estate experts, the board was required to have the approval of the finance committee.

It is alleged that the city council "ordered that the employment by the board of local improvements of Ernest H. Lyons, real estate expert, at $50 per day be and the same is hereby approved." It is averred: That prior to January, 1920, the chairman of the board employed

plaintiff for a period of five years, and that such employment was confirmed by a letter to him from the chairman of the board, written a year and two months later, viz. March, 1921, which, by its terms, set out the following: (a) That he was employed for real estate work on certain streets (not named); (b) compensation to be on basis of appraisal; (c) instructed plaintiff to report to the board of local improvements; (d) employment was to be during the years 1920, 1921, 1922, 1923, and 1924; (e) as a regular employé of the department, plaintiff was expected to give his exclusive time to the work mentioned; (f) all reports, maps, plats, estimates and figures, compiled by him, were to be submitted to the president of the board and copies of the reports filed in the board's office. That plaintiff accepted the terms and commenced the performance of the services, and he performed the contract until the assessment and payment of the income tax. That during 1920 plaintiff received 1 per cent. of the appraised value of the property, amounting to $322,369.93 on account of that work, and on account of work to be done during the four remaining years. That that sum was paid out of the bonds sold to pay the city's part of the improvement. Then follow averments relating to the assessment, and its payment under protest, and the formalties observed by plaintiff as a basis of recovery, the sufficiency of which are not brought into question.

In South Carolina v. United States, 26 S. Ct. 110, 112, 199 U. S. 437, 451 (50 L. Ed. 261, 4 Ann. Cas. 737), plaintiff's general proposition is stated thus: "That which is implied is as much a part of the Constitution as that which is expressed. those matters which are implied, though not expressed, is that the nation may not, in the exercise of its powers, prevent a state from discharging the ordinary functions of government.

Among

In that case there is such a wide discussion of the proposition and citation of authorities that further discussion is unnecessary. The court there said: "To determine to what extent that implication will go we must turn to the condition of things at the time the Constitution was framed."

The extent of the implication is also there so fully considered that the only remaining question for us to consider is whether plaintiff's declaration shows that the taxation, taking a part of the money paid him, tended to prevent the state of Illinois from discharging its ordinary functions of government.

Section 132 provides that with the ordinance and recommendation shall go an estimate of the cost of the improvement, when made in accordance with the prior sections. Section 134 provides that, when the improvement requires the taking or damaging of property, proceedings shall be taken as provided in sections 135 to 156. Section 135 provides that the ordinance for the improvement or some subsequent order shall direct a person named to file a petition in some court of record, "praying that steps may be taken to ascertain the just compensation to be made for private property to be taken or damaged for the improvement or purpose specified in such ordinance, and to ascertain what property will be benefited by such improvement, and the

amount of such benefit."

Section 136 provides what the petition shall contain, and "upon the filing of the petition the court shall enter an order designating two competent persons as commissioners, to act with the superintendent of special assessments, ⚫ who shall investigate and report to the court the just compensation to be made to the respective owners of private property which shall be taken or damaged for the said improvement, and also what real estate will be benefited by such improvement and the amount of such benefits to each parcel. Neither shall be employés of the petitioning municipality and both shall be disinterested persons. They shall be allowed a fee for their services which shall be fixed by the court in advance and may be taxed as costs and included in the amount to be assessed, provided, however, that in cities of this state having a population of 100,000 the fee of said commissioners shall be paid by the city out of its general fund.

or more

Section 137 provides, in detail, how the commissioners shall make investigation, prepare and file their report with the court, showing the description of the parts and parcels of property, the names and residences of the owners, values, damages, benefits, etc. Thereafter, until the establishment of the improvement by the judgment of the court, condemning the property and apportioning the assessment roll, which is the report filed by the commissioners, the whole proceeding is in and under the direction of the court and there is a trial before a jury.

[1-3] While the facts stated in a declaration are, upon demurrer, to be taken as pleaded, yet we take judicial notice of statutory provisions, and any statement of the law in the

that

declaration is but a conclusion, and, if erroneous, may be disregarded. The allegation "that the said board of local improvements of the said city of Chicago was and is charged, under the said acts of the Legislature of the said state of Illinois, with the duty of originating plans for local improvements within the said city," is an erroneous conclusion of the pleader. There is no requirement in the statute that the board of local improvements shall originate any improvement. It "shall have the power to originate a scheme for any local improvement" is the language of the statute, and, while it has law seems to be to have schemes for local the power, purpose and intention of the improvement by special assessment of benefits originate with the property owners, and, whether originated by the board or by the petition of the property owners, the whole theory is that it is of local concern, a local benefit, that may be stopped or postponed by a majority of the frontage involved. [4] The allegation "that the proceedings for of eminent domain needed for such street imthe condemnation of property under the laws provements are conducted under the direction of the said board of local improvements, pursuant to statute of the state of Illinois in that behalf enacted, and authority is given by the said acts of the said Legislature to the said board of local improvements to employ any and all persons necessary to do the work of acquiring property by condemnation, and to estimate the amounts necessary to compensate persons for property damaged and not taken, and to institute proceedings to assess special taxes upon property benefited by such improvements, and to prepare assessment rolls against property specially benefited by such improvements," is an erroneous statement of the law. The proceedings for condemnation are not under the direction of the board of local improvements. That is all done in a court of record, and the person who files a petition therefor is designated in the ordinance or by subsequent order of the city council. Neither is there, by law, either an express or an implied authority in the board of local improvements to employ persons for all the purposes alleged, as above set forth. The provisions of the law are that the assessment roll is to be made by the superintendent of special assessments and two other persons appointed by the court, after they are found to be competent, and "neither shall be employés of the petitioning municipality and both shall be disinterested persons."