Mr. Justice Gridley
delivered the opinion of the court.
The main contention of counsel for defendant is that there can be no recovery by plaintiff in this case because (1) the agreement of September 2, 1913, upon which the suit is based, amounts to the pledging of certain accounts receivable to secure the repayment of money advanced, and is, therefore, a mere money loaning agreement, and not an agreement for the sale of the accounts; and, (2) it being such an agreement, the same is not only ultra vires the plaintiff corporation but is illegal, in that plaintiff as a corporation, organized under the General Incorporation Act of Illinois, is not permitted by its charter to loan money.
We have been favored with elaborate arguments by the respective counsel and, after careful consideration of the same and of some of the cases cited and other cases, we have reached the conclusion that the agreement in question is an agreement for the loaning of money by plaintiff to the ¡Kellastone Company upon accounts receivable of the latter company as security, rather than on agreement for the sale of the accounts to plaintiff, and that the accounts in question in this case should rightly be considered as having been pledged with plaintiff as security for certain moneys loaned thereon to the Kellastone Company, rather tba.u as having been sold by the Kellastone Company to plaintiff. Other agreements, much resembling the agreement in question, have been construed recently by United States courts as not being agreements for the sale of accounts but rather as agreements pledging accounts as security for money loaned, and transactions under said agreements, quite similar to the transactions here disclosed, have been considered by said courts as loans rather than sales. In re American Fibre Reed Co., 206 Fed. 309, affirmed in Home Bond Co. v. McChesney, 127 C. C. A. 552, 210 Fed. 893; In re Grand Union Co., on petition of Hamilton Investment Co., a decision by the United States Circuit Court of Appeals, for the Second Circuit, opinion filed December 15, 1914. See 219 Fed. 353.
While in the agreement here in question it is stated that the Kellastone Company is desirous of “selling” to plaintiff accounts receivable and that plaintiff agrees “to buy” such of the accounts of the Kellastone Company as “are acceptable” to plaintiff, still, as it seems to ns, there are many features of the agreement which characterize it as an agreement for the pledging rather than the sale of accounts. We shall make mention of some of these features: (1) In the second paragraph of the agreement the term “default or loss,” as used therein is construed to mean (a) the nonpayment of an account to plaintiff at maturity, (b) insolvency of the debtor, or (c) failure or refusal of the debtor to accept, receive and retain the property evidenced by an account; and the Kellastone Company agrees to pay to plaintiff “all expenses, attorney’s fees and losses” incurred by plaintiff in and about any account in default. This provision suggests that plaintiff will look to the Kellastone Company and not to the debtor, in the event of plaintiff’s failure to realize on an account at the maturity thereof or in the event of the insolvency of the debtor, and also suggests the right on the part of plaintiff, in either of those events, to demand and enforce repayment to it from the Kellastone Company of the moneys previously advanced on said account. The conduct of the parties is in conformity with this construction. Hast testified that when the accounts in question were not paid at maturity plaintiff “made demand on the Kellastone Company for the money under the contract,” and afterwards demanded that Kastor, as guarantor, “make good these losses.” In 35 Cyc. 39, it is said: “If there is a right reserved by the buyer to demand and enforce repayment the transaction is not a sale but in the nature of a mortgage.” In Robinson v. Farrelly, 16 Ala. 472, it was held that where the vendee retains the right to demand repayment of the vendor, notwithstanding the purchase, it is conclusive to show that the transaction was intended as a security and not a sale. If it was the intention of the parties to the agreement to make a sale of such accounts of the Kellastone Company as were acceptable to plaintiff, why should the former agree to pay the latter “all expenses, attorney’s fees and losses ’ ’ incurred by the latter in and about any account in default? The provision appears to us as negativing any intention of a sale of the accounts. The plaintiff does not take the risk of loss on the accounts. (2) In the third paragraph of the agreement it is provided that the Kellastone Company “shall make entries upon its books disclosing the sale” of the accounts to plaintiff, and in the so-called “certificates of indebtedness,” signed by the Kellastone Company at the time the accounts were assigned, the Kellastone Company “guarantees” that “entries have been made on its books disclosing the absolute sale” of the accounts to plaintiff. If there really was to be a sale of the accounts, such provisions were not needed. In the case of Bright v. Wagle, 3 Dana (Ky.) 252, Bright executed a writing to the effect that he had bargained and sold to Wagle “one negro boy named Daniel,” for a certain sum named, and it was stated in the writing that it was understood that Bright was to have the right of “repurchasing” said boy by paying said sum by a certain date, together with twelve per cent, on the amount, and that “the negro aforesaid is to remain in the possession of said Wagle.” In construing the writing not to be a contract for the sale of the slave, the Court said (p. 257); “There is an express stipulation * * * that the negro was to remain in the possession of Wagle. If the minds of the parties were not running upon a loan, and a mortgage, pledge or lien upon the slave, to secure it, why the introduction of this stipulation? If it were a sale, and so intended by the parties, no reasonable man could doubt, but that the property and immediate possession thereof would pass to the vendee, without any special stipulation to that effect.” (3) In the fourth paragraph of the agreement it is provided that the purchase of accounts by plaintiff is made upon representations in writing concerning the financial responsibility of the Kell cost one Company. If a sale of accounts to plaintiff were contemplated plaintiff would not be concerned about the financial responsibility of the seller, but rather with the financial responsibility of the party owing the accounts. (4) In the first paragraph of the agreement it is provided that seventy-seven per cent, of the face value of the accounts shall be paid upon their acceptance by plaintiff, and that “the remainder, less all deductions,” shall be paid to the Kellastone Company immediately upon payment of any such accounts to plaintiff, but there is the proviso that if, at the time of any settlement between the Kellastone Company and plaintiff, ‘ ‘ any of the accounts purchased hereunder shall be in default” (i. e., not paid to plaintiff at maturity, or the party owing the account be insolvent, etc.), “payment of such remainder, while any of the accounts are in default, shall be discretionary” with plaintiff. We think that this means that the parties to the agreement intended that plaintiff might retain the balance of cash received by it on any paid account or accounts, over and above the seventy-seven per cent, thereof paid by it at the time said account or accounts were assigned to it, as long as any other account remained in “default,” and so retain said balance as security on said account so in default.
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Mr. Justice Gridley
delivered the opinion of the court.
The main contention of counsel for defendant is that there can be no recovery by plaintiff in this case because (1) the agreement of September 2, 1913, upon which the suit is based, amounts to the pledging of certain accounts receivable to secure the repayment of money advanced, and is, therefore, a mere money loaning agreement, and not an agreement for the sale of the accounts; and, (2) it being such an agreement, the same is not only ultra vires the plaintiff corporation but is illegal, in that plaintiff as a corporation, organized under the General Incorporation Act of Illinois, is not permitted by its charter to loan money.
We have been favored with elaborate arguments by the respective counsel and, after careful consideration of the same and of some of the cases cited and other cases, we have reached the conclusion that the agreement in question is an agreement for the loaning of money by plaintiff to the ¡Kellastone Company upon accounts receivable of the latter company as security, rather than on agreement for the sale of the accounts to plaintiff, and that the accounts in question in this case should rightly be considered as having been pledged with plaintiff as security for certain moneys loaned thereon to the Kellastone Company, rather tba.u as having been sold by the Kellastone Company to plaintiff. Other agreements, much resembling the agreement in question, have been construed recently by United States courts as not being agreements for the sale of accounts but rather as agreements pledging accounts as security for money loaned, and transactions under said agreements, quite similar to the transactions here disclosed, have been considered by said courts as loans rather than sales. In re American Fibre Reed Co., 206 Fed. 309, affirmed in Home Bond Co. v. McChesney, 127 C. C. A. 552, 210 Fed. 893; In re Grand Union Co., on petition of Hamilton Investment Co., a decision by the United States Circuit Court of Appeals, for the Second Circuit, opinion filed December 15, 1914. See 219 Fed. 353.
While in the agreement here in question it is stated that the Kellastone Company is desirous of “selling” to plaintiff accounts receivable and that plaintiff agrees “to buy” such of the accounts of the Kellastone Company as “are acceptable” to plaintiff, still, as it seems to ns, there are many features of the agreement which characterize it as an agreement for the pledging rather than the sale of accounts. We shall make mention of some of these features: (1) In the second paragraph of the agreement the term “default or loss,” as used therein is construed to mean (a) the nonpayment of an account to plaintiff at maturity, (b) insolvency of the debtor, or (c) failure or refusal of the debtor to accept, receive and retain the property evidenced by an account; and the Kellastone Company agrees to pay to plaintiff “all expenses, attorney’s fees and losses” incurred by plaintiff in and about any account in default. This provision suggests that plaintiff will look to the Kellastone Company and not to the debtor, in the event of plaintiff’s failure to realize on an account at the maturity thereof or in the event of the insolvency of the debtor, and also suggests the right on the part of plaintiff, in either of those events, to demand and enforce repayment to it from the Kellastone Company of the moneys previously advanced on said account. The conduct of the parties is in conformity with this construction. Hast testified that when the accounts in question were not paid at maturity plaintiff “made demand on the Kellastone Company for the money under the contract,” and afterwards demanded that Kastor, as guarantor, “make good these losses.” In 35 Cyc. 39, it is said: “If there is a right reserved by the buyer to demand and enforce repayment the transaction is not a sale but in the nature of a mortgage.” In Robinson v. Farrelly, 16 Ala. 472, it was held that where the vendee retains the right to demand repayment of the vendor, notwithstanding the purchase, it is conclusive to show that the transaction was intended as a security and not a sale. If it was the intention of the parties to the agreement to make a sale of such accounts of the Kellastone Company as were acceptable to plaintiff, why should the former agree to pay the latter “all expenses, attorney’s fees and losses ’ ’ incurred by the latter in and about any account in default? The provision appears to us as negativing any intention of a sale of the accounts. The plaintiff does not take the risk of loss on the accounts. (2) In the third paragraph of the agreement it is provided that the Kellastone Company “shall make entries upon its books disclosing the sale” of the accounts to plaintiff, and in the so-called “certificates of indebtedness,” signed by the Kellastone Company at the time the accounts were assigned, the Kellastone Company “guarantees” that “entries have been made on its books disclosing the absolute sale” of the accounts to plaintiff. If there really was to be a sale of the accounts, such provisions were not needed. In the case of Bright v. Wagle, 3 Dana (Ky.) 252, Bright executed a writing to the effect that he had bargained and sold to Wagle “one negro boy named Daniel,” for a certain sum named, and it was stated in the writing that it was understood that Bright was to have the right of “repurchasing” said boy by paying said sum by a certain date, together with twelve per cent, on the amount, and that “the negro aforesaid is to remain in the possession of said Wagle.” In construing the writing not to be a contract for the sale of the slave, the Court said (p. 257); “There is an express stipulation * * * that the negro was to remain in the possession of Wagle. If the minds of the parties were not running upon a loan, and a mortgage, pledge or lien upon the slave, to secure it, why the introduction of this stipulation? If it were a sale, and so intended by the parties, no reasonable man could doubt, but that the property and immediate possession thereof would pass to the vendee, without any special stipulation to that effect.” (3) In the fourth paragraph of the agreement it is provided that the purchase of accounts by plaintiff is made upon representations in writing concerning the financial responsibility of the Kell cost one Company. If a sale of accounts to plaintiff were contemplated plaintiff would not be concerned about the financial responsibility of the seller, but rather with the financial responsibility of the party owing the accounts. (4) In the first paragraph of the agreement it is provided that seventy-seven per cent, of the face value of the accounts shall be paid upon their acceptance by plaintiff, and that “the remainder, less all deductions,” shall be paid to the Kellastone Company immediately upon payment of any such accounts to plaintiff, but there is the proviso that if, at the time of any settlement between the Kellastone Company and plaintiff, ‘ ‘ any of the accounts purchased hereunder shall be in default” (i. e., not paid to plaintiff at maturity, or the party owing the account be insolvent, etc.), “payment of such remainder, while any of the accounts are in default, shall be discretionary” with plaintiff. We think that this means that the parties to the agreement intended that plaintiff might retain the balance of cash received by it on any paid account or accounts, over and above the seventy-seven per cent, thereof paid by it at the time said account or accounts were assigned to it, as long as any other account remained in “default,” and so retain said balance as security on said account so in default. We do not think that these provisions, taken in connection with the other provisions contained in said first paragraph, are consistent with the idea of a sale of the accounts. In the American Fibre Reed Co. case, supra, the contract there in question had provisions very-similar to the provisions in said first paragraph of the agreement here in question, and on the review of that case, in Home Bond Co. v. McChesney, supra, the Court said (p. 894): “'The record discloses to us a mutual intendment that the right at least to 20 per cent, of the full value of each of the accounts receivable was always to remain in the bankrupts, except only for purposes of security; this right could not be both sold cmd owned by the bankrupts.” (5) In the “guaranty and waiver,” signed by defendant and others, it is stated that the undersigned jointly and severally guaranty to plaintiff the full and prompt “payment, performance and discharge” by the Kellastone Company of each of the provisions and conditions of the agreement, i. e., that the Kellastone Company will, among other things, pay plaintiff11 all expenses, attorney’s fees and losses” incurred by plaintiff in or about any account in default. We think that this provision is also inconsistent with the idea of a sale of the accounts. It suggests that the parties to the agreement intended that plaintiff should have additional security for the money advanced on accounts beyond the security afforded by the accounts themselves. (6) Before the agreement was signed the evidence shows that the Kellastone Company was “hard up” and needed money to run its business and had applied to plaintiff for monetary assistance, and that plaintiff insisted upon defendant signing said “guaranty and waiver” before it would enter into the contract. (7) There are many usurious features in the agreement, and we think .that the statement of the Court in the case of In re American Fibre Reed Co., supra, (p: 318) relative to the contracts there in question is applicable to the agreement here in question, viz.: “In so far as the contracts in question here use words fit for a contract of purchase, they are mere shams and devices to cover loans of money at usurious rates of interest.”
The plaintiff is a corporation organized under the General Incorporation Act of Illinois. As such a corporation it is prohibited from engaging in the “business of loaning money” (sec. 1, ch. 32, Hurd’s R. S. J. & A. ¶ 2418). Holding as we do that the agreement here in question is an agreement for the loaning of money by plaintiff to the Kellastone Company, it follows, we think, that the agreement is absolutely void, that no action could be maintained thereon by plaintiff against the Kellastone Company and that the doctrine of estoppel could not apply. In re Grand Union Co., supra; Central Trans. Co. v. Pullman’s Palace Car Co., 139 U. S. 24; National Home Building & Loan Ass’n v. Home Sav. Bank, 181 Ill. 35; Steele v. Fraternal Tribunes, 215 Ill. 190. And we think it also follows that no action can be maintained by plaintiff against defendant as guarantor of a void agreement. 20 Cyc. 1420.
In the “guaranty and waiver,” which the defendant signed and which is on the reverse side of the paper containing the agreement between the Kellastone Company and plaintiff, it is provided that defendant guaranties to plaintiff the full, prompt and faithful payment, performance and discharge by the Kellastone Company of each of the provisions and conditions of the agreement “on the reverse side hereof, or any other instrument given or executed in pursuance thereof.” In the so-called “certificates of indebtedness,” signed only by the Kellastone Company when the accounts in question were assigned by it to the plaintiff, it is stated that “the undersigned hereby guarantees the payment in full” to plaintiff “of the above named contracts and open accounts in accordance with the terms indicated and appearing thereon. ” It is to be noticed that these instruments are not signed by the defendant, Kastor. It is here urged by plaintiff’s counsel that these instruments should be considered as a part of defendant’s guaranty because they are instruments “given or executed in pursuance of” said agreement, and that this fixes the liability of defendant in this ease. We cannot assent to this, for reasons stated in American Credit & Trust Co. v. Wits, 186 Ill. App. 184, 187. And in onr opinion the decision in that case discloses other good reasons in addition to those herein-above mentioned, why there can be no recovery in the present case against the defendant as guarantor. In view of the foregoing, it is unnecessary for us to discuss the other points raised by counsel for defendant.
In Marty Bros. & Harty Co. v. Polakow, 237 Ill. 559, 567, it is said: “The Appellate Court may reverse without remanding under two conditions: First, where it finds the facts in controversy different from the finding of the trial court and recites the ultimate facts so found in its judgment; second, when it reverses for errors of law which cannot he obviated or cured on another trial.” We are of the opinion that under the facts of this case the trial court erred in refusing to grant the motions of defendant, made at the conclusion of plaintiff’s evidence and again at the close of all the evidence, to instruct the jury to find for the defendant, and in entering the judgment appealed from, and that there can be no recovery by plaintiff of defendant on the contract and guaranty sued upon, at any subsequent trial. The judgment of the Municipal Court will be reversed, but the cause will not be remanded.
Reversed.