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On January 24, 1923, the plaintiff had

was authorized by his tenant in common to not availed himself of his option to purchase sign his name to this agreement. the Vail estate, and on that date, by an agree

The evidence is uncontradicted that ment in writing, gave full and complete Grapes ratified this agreement, and, while possession to the defendants of the real es- the question is not now before us, we think tate described in the deed of September 7, there was sufficient evidence upon which both 1922, and agreed that he would operate and Grapes and Manley could in equity have care for the property, collecting the rents been held to the performance of this agreeand paying all bills incurred thereon, except ment, which the parties all treated as legal insurance or taxes or assessments against and binding upon them. the property, for one-half the gross receipts

The facts are within a small compass: received by him from the rentals and the in- The plaintiff, for the purpose of securing come of a storage business conducted upon an option for the purchase of this large said property, and that he would deposit to property in Lyndonville, and relying upon the credit of the defendants each week their his expectation that he would be able to half of the total gross receipts.

raise sufficient money upon it to enable him On October 5, 1923, the plaintiff filed a . to carry out his agreement with the defendbill of complaint, seeking to have the deed of ants, was willing to convey to them his real September 7, 1922, by which he conveyed estate in Lynn, and to execute thereafter an the Lynn real estate to the defendants, ad- agreement by which title to the defendants judged and decreed to be void and of no

under said deed should become absolute. effect, and for further relief.

Having failed to find any party or parties After hearing the plaintiff's evidence, the who would, upon the security afforded by judge of the District Court entered a final the Lyndonville property, loan him the decree, dismissing this bill of complaint and money necessary to carry out his agreement, awarding costs to the defendants, from which and the mortgagees holding mortgages updecree this appeal has been taken.

on his Lynn property pressing him for payThe errors assigned are, in substance, that ment, he was compelled to yield full possesthe court erred in not finding that the agree- sion to the defendants of his real estate in ment of August 25, 1922, between the plain- Lynn. tiff and defendants, was void and of no effect,

Because of his disappointed hopes he and therefore should be set aside and can

now seeks a cancellation of the deed which celed; in not finding that the defendants he gave, on the ground that he was defraudulently induced the plaintiff to sign the frauded and deceived. agreements of September 9, 1922, January 3, After a careful study of all the evidence 1923, and January 24, 1923, and that by de- we are unable to find any testimony which ception and fraud in recording the deed of supports the charge of fraud or coercion. September 7, 1922, the defendants injured The agreement with the defendants was enthe financial standing of the plaintiff, so that tered into in good faith by the plaintiff, and he was unable to meet his obligations to them; in evident reliance upon his hopes of securin not finding that the defendants delayed ing a large loan upon the Lyndonville propand prevented the plaintiff from asserting erty when he might acquire it, which would his rights against the defendants with respect enable him to carry out this agreement. to his Lynn property; in not finding that With knowledge that the deed of the Lynn the defendants defrauded and coerced the property, dated September 7, 1922, had been plaintiff in obtaining his signature to the recorded by the defendants, in order that he agreement of September 9, 1922; and in might secure an extension of the option given not finding that the contract of January to him by the defendants, he entered into 3, 1923, was broken by the defendants, and the agreement of January 3, 1923, by which that the plaintiff was thereby released from he agreed that the deed should become absoits conditions and consequences; also that lute on January 25, 1923, and that he would the court erred in not relieving the plaintiff claim no right, title, or interest thereafter in from forfeiture of his property.

the property thereby conveyed. Grapes & Manley owned the Lyndonville He never made any payment to the deproperty as tenants in common, and while fendants, and has never received any deed the agreement of August 25, 1922, was sign- from them, but did receive the option for ed “Grapes & Manley, by J. B. Manley," which he contracted. instead of being signed by each of the ten- No fraud or coercion having been found ants in common, Manley testified that he by the District Court, and none appearing in

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10 F.(20) 3 the record presented to us, the entry must 8. Internal revenue 7-Compensation of be:

real estate expert in condemnation proceedThe decree of the District Court is af

ings by city held not exempt from income

tax, as money received for services as infirmed, with costs to the appellees in this strumentality of state government. court

Compensation received by real estate expert for work incident to condemnation of property by city for street improvements held not exempt from federal income tax as money re

ceived for services as instrumentality of state LYONS V. REINECKE, Collector of Internal

government in performing its functions. Revenue. (Circuit Court of Appeals, Seventh Circuit.

In Error to the District Court of the December 11, 1925. Rehearing Denied United States for the Eastern Division of January 15, 1926.)

the Northern District of Illinois. No. 3600.

Action by Ernest H. Lyons against Mabel 1. Pleading m214(1)-On demurrer, facts G. Reinecke, Collector of Internal Revenue. stated in declaration taken as pleaded. Demurrer to declaration sustained, and plain

On demurrer, facts stated in declaration tiff brings error. Judgment affirmed. are taken as pleaded.

Albert Fink, of Chicago, Ill., for plain2. Evidence 29—Pleading cm214(5) Ju

tiff in error. dicial notice taken of statutes; statement of law in declaration may be disregarded as mero

John R. Wheeler, of Washington, D. C., conclusion,

for defendant in error. Court takes judicial notice of statutory provisions, and statement of law in declaration de

Before EVANS, PAGE, and ANDERmurred to is mere conclusion, which may be SON, Circuit Judges. disregarded, if erroneous. 3. Municipal corporations on 278(1/2)-Chicago

PAGE, Circuit Judge. Plaintiff in error, board of local improvements not charged with called plaintiff, sues to recover money paid duty of originating plans for improvements.

under protest as an income tax, claimed to Board of local improvements of city of Chi- have been illegally exacted from him for the cago is not charged with duty of originating plans for local improvements, under Cahill's year 1920. He states, as the basis of his Stat. III. 1921, c. 24, $ 129.

claim, that the income received was for serv

ices as an “instrumentality of the government 4. Eminent domain C 168(2)-Condemnation

proceedings by city of Chicago not under die of the state of Illinois in carrying on and rection of board of local improvements. performing its functions of government.”

Proceedings for condemnation of property The question is: Is the declaration obnoxious for street improvements in city of Chicago are to a general demurrer? not under direction of board of local improvements, nor is it authorized to employ persons lature of the state of Illinois, having the

The declaration avers: That the Legisto prepare assessment roll, in view of Cahill's Stat. Ill, 1921, c. 24, 88 134-137.

right to do so, created the city of Chicago

and a board of local improvements therefor. 5. Internal revenue e38—Declaration in suit to recover income tax paid held too indefinite That all streets and highways in the city of and uncertain.

Chicago have been and are laid out, improvDeclaration, in suit to recover amount of ed, and extended under the authority of the income tax paid under protest, on ground that state Legislature. That the streets and highincome was received for services as instrumentality of state government held too indefinite ways in all cities of the state are established and uncertain as to work plaintiff was employed for the use of all of its inhabitants. That to do and did, and whether it was such as to the board of local improvements of Chicago exempt money paid therefor from assessment. was created by the state Legislature, and is 6. Pleading 34(4)-Pleadings construed

charged with the duty of originating plans most strongly against pleader.

for local improvements, including the esPleadings are to be construed most strongly tablishment, etc., of streets, to be paid for by against pleader.

special assessments, levied upon the property 7. Internal revenue ww38-Burden on plain. benefited, or by taxation, or partly by special

tiff, suing to recover income tax paid, to al assessment and partly by general taxation. lege facts showing income not subjec to tax. That proceedings to condemn property for

Burden was on plaintiff, suing to recover local improvements are conducted under the amount of income tax paid under protest, to set direction of that board and that it is empowforth, by clear and unequivocal averments facts showing that money paid him was not subject ered by the Legislature (a) to employ all to tax.

persons necessary to do work of condemning

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property; (b) to estimate compensation for plaintiff for a period of five years, and that property damaged and not taken; (c) to such employment was confirmed by a letter institute proceedings to assess property bene- to him from the chairman of the board, writfited; (d) to prepare assessment rolls; (e) ten a year and two months later, viz. March, to specify amounts to be paid by general tax- 1921, which, by its terms, set out the followation; and (f) to aid in procuring approval ing: (a) That he was employed for real esof assessment rolls in the courts. That those tate work on certain streets (not named); so employed are to be paid out of taxes lev- (b) compensation to be on basis of appraisal; ied, assessed, and collected under the laws (c) instructed plaintiff to report to the board of Illinois. That said board's general plan of of local improvements; (d) employment was operation is (a) to pass a resolution direct to be during the years 1920, 1921, 1922, 1923, ing the making of the improvement; (b) its and 1924; (e) as a regular employé of the engineer estimates costs; (c) to hold a public department, plaintiff was expected to give his hearing; (d) to submit an ordinance there exclusive time to the work mentioned; (f) for to the city council; (e) if and when the all reports, maps, plats, estimates and figordinance is passed, proceedings for confir- ures, compiled by him, were to be submitted mation of the assessment and condemnation to the president of the board and copies of are commenced in the courts; (f) if and the reports filed in the board's office. That when favorable judgment is had, contracts plaintiff accepted the terms and commenced are entered into and persons are employed to the performance of the services, and he perdo the necessary work, under the control and formed the contract until the assessment and direction of the board. That prior to Jan- payment of the income tax. That during uary 1, 1920, such proceedings were originat- 1920 plaintiff received 1 per cent. of the aped and an ordinance passed by the city coun- praised value of the property, amounting cil for improving and widening numerous to $322,369.93 on account of that work, and streets. That 7,000 pieces of property, own

on account of work to be done during the ed by 7,000 different persons, were to be con- four remaining years. That that sum was demned and taken, the gross value of which paid out of the bonds sold to pay the city's exceeded $65,000,000. That 100,000 separate part of the improvement. Then follow averpieces of property, specially benefited by ments relating to the assessment, and its paythe improvements, had to be valued. That ment under protest, and the formalties obthe city passed an ordinance authorizing the served by plaintiff as a basis of recovery, the sale of $28,600,000 in bonds, to pay the city's sufficiency of which are not brought into part of the cost of improvements. That, on question. recommendation of the finance committee of In South Carolina v. United States, 26 S. the city council of the city of Chicago, the Ct. 110, 112, 199 U. S. 437, 451 (50 L. Ed. city council passed an order authorizing the 261, 4 Ann. Cas. 737), plaintiff's general board “to employ the following for such pe- proposition is stated thus: “That which is riods of time during 1920 as may be neces- implied is as much a part of the Constitution sary:" Then follows a list of a large num- as that which is expressed. ber of experts, including, "real estate ex- those matters which are implied, though not perts, 4, on the basis of 1 per cent. of the expressed, is that the nation may not, in the value of property and $50 per day for testi- exercise of its powers, prevent a state from fying in court on behalf of the city.” That discharging the ordinary functions of governthe cost was to be charged to appropriations ment. thereafter made and the comptroller and In that case there is such a wide discustreasurer were to pass pay rolls for the same, sion of the proposition and citation of auwhen approved by the president of the board. thorities that further discussion is unnecesThat before retaining services of certain ex- sary. The court there said: “To determine perts, including the real estate experts, the to what extent that implication will go we board was required to have the approval of must turn to the condition of things at the the finance committee.

time the Constitution was framed.” It is alleged that the city council "order- The extent of the implication is also there ed that the employment by the board of local so fully considered that the only remaining improvements of

Ernest H. Ly- question for us to consider is whether plainons, real estate expert, at $50 per day tiff's declaration shows that the taxation, tak

be and the same is hereby approv. ing a part of the money paid him, tended to ed.” It is averred: That prior to January, prevent the state of Illinois from discharging 1920, the chairman of the board employed its ordinary functions of government.

• Among

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10 F.(20) 8 Plaintiff, in support of his contention, the same shall first be recommended by the lays great stress on Atkin v. Kansas, 24 S. board of local improvements. Ct. 124, 191 U. S. 207, 48 L. Ed. 148. That Section 127: “In cities

havcase involved the validity, under the Consti- ing a population of 100,000 or more, tution of the United States, of the Kansas there is hereby created a board of local imEight-Hour Law of 1891 (Laws 1891, p. provements consisting of the superintendent 192), and we are of opinion that it is unim- of special assessments and five other memportant here. The court said: "We rest our bers; such five members shall be nominated decision upon the broad ground that the work by the mayor

and no one of which being of a public character, absolutely un- except such superintendent of special assessder the control of the state and its municipal ments, shall be the head of any other departagents acting by its authority, it is for the ment of the government of such city, or hold state to prescribe the conditions under which any other office or position therein." it will permit work of that kind to be done.” Section 129: “All ordinances for local im

That is not at all the question here. Since provement to be paid for wholly or in part the Illinois Constitution of 1870—excepting by special assessment or special taxation only certain provisions as to the city of Chi- shall originate with the board of local imcago (article 4, § 34)-the incorporation of provements. Petitions for any such public cities, villages, and towns could and can be improvements shall be addressed to said only under the general law. The general act board. Said board shall have the power to of 1872 (Laws 1871-72, p. 218) has con- originate a scheme for any local improve tinued, though frequently amended, to the ment, to be paid for by special assessment present time, and, in so far as we are here or special tax, either with or without a peticoncerned, Chicago is under the general law. tion, and in either case shall adopt a resoluProvisions for many things not strictly gov- tion describing the proposed improvement. ernmental in their character have long been contained in the general act for the incorpo It is further in that section provided that, ration of cities and villages.

if private property is to be taken or damagBy article 9, § 9, of the Constitution of ed, the resolution shall describe the property 1870, it is provided : “The General Assembly proposed to be taken and fix a day and hour may vest the corporate authorities of cities, for public hearing, and that the board shall towns and villages with power to make local require an estimate of the cost of such imimprovements by special assessment, or by provement (omitting land to be acquired) to special taxation of contiguous property, or be made in writing by the engineer of the otherwise. For all other corporate purposes, board. After describing the notice that shall all municipal corporations may be vested with be sent, there follows: "If upon such hearauthority to assess and collect taxes; but ing the board shall deem such improvement such taxes shall be uniform in respect to desirable, it shall adopt a resolution therefor persons and property, within the jurisdiction and prepare and submit an ordinance thereof the body imposing the same.

for as hereinafter provided." The Legislature, pursuant thereto, au- Section 130 provides what shall be done thorized cities, villages, and towns to make at the public hearing by way of changing, local improvements by special assessment, by altering or modifying the extent, kind, charspecial taxation of contiguous property, or

acter and estimated cost of the improvement, by general taxation or otherwise, as they shall and: “If the said proposed improvement be by ordinance prescribe. It appears from not abandoned, the said board shall cause an Cahill's Illinois Statutes of 1921, c. 24, § ordinance to be prepared therefor, to be sub123: “There shall be appointed

mitted to the council.” And, further: "In in the manner provided by law, or if no such cities of 100,000 inhabitants or over, when a method be provided then by appointment of remonstrance petition is filed by the owners the mayor, a commissioner of public works, of a majority of the frontage on the line of a superintendent of streets, a superintendent the proposed improvement with the board of of special assessments, a superintendent of local improvements within thirty (30) days sewers, and a city engineer.

after the public hearing thereon, said board It is further provided (section 126): "No shall thereupon stay all proceedings thereordinance for any local improvements, to be in for one year from said date.” paid wholly or in part by special assessment Section 131 provides that, with the ordior special taxation, shall be considered or nance, the board shall also send to the council passed by the city council

unless its recommendation of such improvement.

:

that power,

Section 132 provides that with the ordinance declaration is but a conclusion, and, if erroand recommendation shall go an estimate of neous, may be disregarded. The allegation the cost of the improvement, when made in "that the said board of local improvements accordance with the prior sections. Section of the said city of Chicago was and is charg134 provides that, when the improvement re- ed, under the said acts of the Legislature of quires the taking or damaging of property, the said state of Illinois, with the duty of proceedings shall be taken as provided in sec- originating plans for local improvements tions 135 to 156. Section 135 provides that within the said city,” is an erroneous conthe ordinance for the improvement or some clusion of the pleader. There is no requiresubsequent order shall direct a person named ment in the statute that the board of local to file a petition in some court of record, improvements shall originate any improve"praying that steps may be taken to ascertain ment. It “shall have the power to originate a the just compensation to be made for private scheme for any local improvement” is the property to be taken or damaged for the im- language of the statute, and, while it has

the provement or purpose specified in such ordi- law seems to be to have schemes for local

purpose and intention of the nance, and to ascertain what property will be benefited by such improvement, and the improvement by special assessment of benebenefited by such improvement, and the fits originate with the property owners, and, amount of such benefit."

whether originated by the board or by the peSection 136 provides what the petition tition of the property owners, the whole theshall contain, and “upon the filing of the pe- ory is that it is of local concern, a local bene tition the court shall enter an order designat- fit, that may be stopped or postponed by a ing two competent persons as commissioners, to act with the superintendent of special as

majority of the frontage involved. sessments, • who shall investigate [4] The allegation that the proceedings for and report to the court the just compensation the condemnation of property under the laws

of eminent domain needed for such street imto be made to the respective owners of private property which shall be taken or damag- tion of the said board of local improvements,

provements are conducted under the direced for the said improvement, and also what real estate will be benefited by such improve that behalf enacted, and authority is given

pursuant to statute of the state of Illinois in ment and the amount of such benefits to each by the said acts of the said Legislature to the parcel. Neither shall be employés of the pe said board of local improvements to employ titioning municipality and both shall be dis- any and all persons necessary to do the work interested persons. They shall be allowed a of acquiring property by condemnation, and fee for their services which shall be fixed by to estimate the amounts necessary to comthe court in advance

and may be pensate persons for property damaged and taxed as costs and included in the amount to not taken, and to institute proceedings to be assessed, provided, however, that in cities assess special taxes upon property benefited of this state having a population of 100,000 by such improvements, and to prepare assess

the fee of said commis- ment rolls against property specially benefitsioners shall be paid by the city out of its ed by such improvements,” is an erroneous general fund.

statement of the law. The proceedings for Section 137 provides, in detail, how the condemnation are not under the direction of commissioners shall make investigation, pre- the board of local improvements. That is all pare and file their report with the court, done in a court of record, and the person showing the description of the parts and who files a petition therefor is designated in parcels of property, the names and residences the ordinance or by subsequent order of the of the owners, values, damages, benefits, etc. city council. Neither is there, by law, either Thereafter, until the establishment of the an express or an implied authority in the improvement by the judgment of the court, board of local improvements to employ percondemning the property and apportioning sons for all the purposes alleged, as above the assessment roll, which is the report filed set forth. The provisions of the law are that by the commissioners, the whole proceeding is the assessment roll is to be made by the suin and under the direction of the court and perintendent of special assessments and two there is a trial before a jury.

other persons appointed by the court, after [1-3] While the facts stated in a declaration they are found to be competent, and "neiare, upon demurrer, to be taken as pleaded, ther shall be employés of the petitioning yet we take judicial notice of statutory pro- municipality and both shall be disinterested visions, and any statement of the law in the persons."

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