McCausland v. Drake

3 Stew. 344

Opinion

By JUDGE SAFFOLD.

No objection is made as to the validity of the bond as between the defendant and Po-len, the payee; on the contrary, it is admitted to have been a bona fide and subsisting debt. Then the question arises, whether the illegality of the consideration of the assignment, consisting in the composition of an alleged felony between the assignor and assignee, constitutes matter of legal defence by the maker, even when urged at the request of the assignor; and after a violation of the stipulation on the part of the plaintiff, by a fruitless attempt to institute the prosecution. With respect to the latter branches of the defence, it is deemed sufficient to remark, that neither the request of the assignor, nor the violation <bf the contract, as described, can vary the effect of the assignment. The assignor not being a party to the suit, the judgment cannot be used as evidence, either for or against him; consequently, he has no legal right to the defence, or in any manner control the suit. And consideration being at best illegal, the failure thereof, or violation of tne terms stipulated, cannot increase the ob-jcctionsto it.

But the main question, and one highly important in its nature, is that which relates to the illegality of the contract of assignment. It is a general principle of law, that the maker of a bond or note, cannot be affected by the nature or terms of any future assignment of the instrument; that his defence can neither derive aid, or receive prejudice thereby. In opposition however to this doctrine, the defendant’s counsel has referred, among others, to the case of Strong v Tompkins,

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a which has afforded him a very plausible argument; and if the note which was the foundation of that suit, is to be regarded as the evidence of a debt, created on a valuable and sufficient consideration, and subsisting between the original parties, previous to the assignment; and if there be nothing peculiar in the principles of that decision, excepting it from the general iule in relation to illegal contracts, it would appear to go as far as any one decision of the Supreme Court of New York can do, in sustaining the contrary doctrine. In that rase, the plaintiff as deputy sheriff, took an assigned note, instead of taking bail of the defendants, on whom he had served a process, requiring bail. He received the assignment to himself, by way of indemnity, and under the penalty of a forfeiture of the note, if he was not indemnified; and the note was to be applied towards the settlement of the demand, for which the defendants were sued. All this agreement was held to be absolutely void by the statute of that State, which declares that “no sheriff or other officers shall take any obligation, for any cause aforesaid, or by color of their office, but only to themselves, and by the name of their office, and upon condition written,” &c; and that “if any sheriff or other officers, take any obligation in other form, by color of their office, it shall be void.” In arriving at their decision, that Court recognised the rule, that though their statute speaks only of an obligation, yet that a promise to save harmless, was equally within the statute. They held the assignment to be a nullity, and that it afforded the deputy sheriff, as assignee, no more right to sue, than if the name of the payee had been forged.

The report of the case does not explicitly shew whether the note then in question, had been previously created on valid consideration, between the original parties to if: or whether they manuf-etured it for the purpose of offering ¡( ;)S an indemnity to the sheriff, for omitting to take a bail bond. Hut fro.n the vague notice taken of the note, per-the fur rier conclusion is best warranted. It is however to he ob erved. that the indemnity was taken by a ministerial officer, in the execution of a public trust, and i i direct violation of a statute, expressly declaring such to be voi 1 in the derision, stress is laid on the very great abuse and oppression which were anprehended from simi-1 ir practices, if tolented, and the f.ei.iiies which would thereby he afforded to elude the provisions of a very beneficial statute. In support of the contested principles of this decision, no other authot¡ties were.cited by the counsel; but the Court referred to two o'her cases of violation of the st ne statute by sheriffs, who had taken fir their indemnity, securities created for the express purpose. They were the cases of Love v. Palmer, et. al a and Reed v. Pruyn & Staals b It may therefore lie h f'rred, that no disert-inflation w ts attempted between the illegal assignment of a valid security, an I the creation of an instrument orig:-naily void lor illegality, or at least none was allowed. That su-di distincti m exists, is maintained by the whole cur'ent of authnr'ties.

Another cas» relied on by the dtf'ndart’s connstd. is that of Wallace v. Hardacre.c In that case, .Maine who became the indorser of the bill sued upon, had passed several bills to Wallace for a valuable consideration, on which he had forged the acceptances of a Mi Addison, his uncle. Maine dreading the consequences, took up the forged hill«, and h iving procured the accept nice of Hardacrc to the bill which was the subject of the suit, indorsed the same to Wallace, in lieu of the former, he kno vingnli the circumstances. The acceptor, it is admitted, had received no vilui. Lord Ellenhorough held, “that to bar the right of the indorser, it was necessary to shew that the bill had bee i indorsed as a consideration for compounding a prosecution for forgerv, to which the indorser was liable.” That if any bargiining could be shewn to stifle a prosecution for a criminal act. the actio i could certainly not he maintained: but otherwise, the mere exch.r ge of securities that had been forged for others without this vice, would not invalidate the plaintiff's right to recover against the acceptor of the latter bill. The corrupt bargain not having been shewn, the plaintiff recovered; and though the Court ru’ed that such corrupt bargain would have te I a recovery by the assignee, doubtless it was and ought to have been considered a material feature in the case, that the bi 1 hui no valid existence as evi lence of a debt, previous to the assignment to the plaintiff; that it was f >r the express purp >se. and that theacceptnn'ce was without consideration. These were facts essentially different from the case under consideration.

On the same side, the case of Mead v. Young a is re lied on as an au hority, denying the right of the piesent plaintiff to recover. Tha’ case onl\ recognises the principle which this Court fully admits, and which has seldom been contes'ed in modern times, that under a fmged as. s'gnment of a hill, the assignee, however innocent, can acquire no legd right of action. And though lite assignment was made by a different person, hearing the same name widt tlie true pajee, yet as he knew lie was not tfie proper person, it was no less a forgery. But the case of Littell v. Hord,b cited on the part of the plaintiff, maintains the principle favorable to his right of action. That was an action of debt on a bill, sii gle by 1 he assignee against the obligor. The bill was buna fide between the original parto s, but had been as-igned to the plaintiff in the consummation of an usurious contract; this was the defence relied on, and usurious contra-ls. by the statute of Kentucky, were declared to be illegal and void. But the Court held, that however unfair and usurious the contract between the as-ignor and assignee may have been, the obligor could not have been injured by it; that payment to the holder of the writing, under a regular afs'gtt-me t to him, would have been a complete discharge of the obligation; and that the pleas only contained matter inter alios acta, of which the obligor could not avail himself.

The principles of the case of Munn v. Commission Company,c which is also referred to in the argument, are entitled to some influence on this question. There, a hill had been assigned under circumstances which vwre contended to have been usuri..us. The Court remarked in their decision, that “the principle was Moo well settled to be questioned, that a bill free from usury in its eoncoction, may he sold at a discount, by allowing the purchaser to pay less for it, than it would amount to at the legal rale of interest, for the time tlie bill had to run.” The reason they assigned for ihe rule, is more material to the present contest. It was, that “as the bill wasireo from usury, be- tbe immediate parties to it, no after transaction with person «an, as respects those parties, invalidate it.” A similar doctrine is maintained in the case of Faris & Powell v. King.a That being a question of usury, this Court adjudged the original contract void, but observed in opinion, that “if a note or bond be given on a legal consideration, and free from usury in its origin, no subsequent illegal contract, in which it may be transferred, can impair t.he holder’s right of action against the original debtor.”

From the principles of the various decisions I have reviewed, and the general analogies of 'he law, I think it results that though a bond or note has a valid existence between the original parties, yet if the assignment upon it be in fact a forgery, or be made by any one without authority'; or under any circumstances, which will sustain the defence, that the assignment is not the act of the assignor, for the reason that no actual or sufficient assignment has been made, the maker, though justly indebted to the paj'ee, may successfully resist a recovery by the fictitious assignee, and the debt continues to subsist in favor of the payee or other rightful holder. • But if the instrument has been executed for a valid consideration between the original parties, and the payee has voluntarily assigned the same, he has thereby transferred to the assignee, whatever right of action he had. It is immaterial to the original debtor, to whom he is required to make payment.; the want of consideration, fraud, or illegality between the assignor and assignee, is a matter of perfect indifference to him. He ought, not to be permitted to question the motives of others, in which he has no interest or concern. If a felony was compounded between the assignor and as-signee of this bond, the former was no less criminal than the latter; and it is with an ill grace that either can after-wards complain of it in a Court of justice. A well settled rule of lavv in such case is, that Courts of justice will not investigate illegal transactions for the benefit of aparliceps criminis; nor will they adjust fraud alleged to have been committed in the assignment of a negotiable or assignable security, in an action against a primary debtor; but if either of such subsequent parties has sustained an injury, that the law will redress, he must resort to his direct action for indemnity. Suppose in this case, the assignor, instead of transferring the bond, had paid the same amount in money, for the same.consideration, or had delived an article of property, and should afiervvards sue the person whom he contracted, to recover it back, he would doubtless fail under the maxim, ex turpi causa non aritur ac-iio, and melior est conditio possidentis.

Hence we are of opinion, that the judgment of the below was erroneous; and in as much as the pleas were in bar, and the defendant could, under the statute, also have pleaded the general issue, or any other special matter in bar; from the circumstance of his not having done so, he must be presumed to have had no other defence; therefore a majority of the Court are of opinion, that the judgment of the County Court be reversed, and that this Court render judgment for the plaintiff, for the amount of the note.

By JUDGE CRENSHAW.

The inquiry is, whether the assignment of the bond on the consideration, and under the facts set forth in the plea, conveyed any right of property to the plaintiff, and is this an available defence in an action by the assignee against the maker of the bond?

In pursuing a train of reasoning, independent of the rules of law, the mind would naturally and readily conclude, that the assignment transferred no right of property or of action to the plaintiff; that though Polen was not strictly under any physical duress, yet the charge of an infamous crime, the threat to prosecute, and the rigorous condition prescribed, to prevent that threat from being carried into effect, must have had such an influence on his fears and apprehensions, as to deprive him of that free and voluntary consent, which was morally essential to the validity of a contract. That through these improper means, the transfer of the bond was literally, and in the language of the plea, extorted from the defendant by the plaintiff, and consequently gave him no right of property or of action. By a recurrence to the rules and principles of law, I think this deduction will he equally clear. Every lawyer must admit, that it is unlawful to compound a crime, or to stifle a prosecution for a felony, and that every contract made on such consideration, is null and void. Supposing then that Polen was under no constraint, either physical or molrae, yet as the consideration of the transfer of the bond was the compounding a crime, or the stifling a prosecution for a felony, he lost nothing, nor did the plaintiff acquire any right by the transfer. In Wallace v. Hardacre,a which was an action by the indorsee against the acceptor of a bill of cxchanc;e, Lord Ellcnhorough held, ‘‘that in bar the right of the indorsee, it was necessary tú shew that the bill liad been indorsed as a consideration for compounding a prosecution for forgery, to which the in* dorser was liable: and that if any bargaining could be to slide a prosecution fora criminal act, the action could not be maintained.” This was a case of negotiable paper, in the strictest sense; the action was by the indor-ser against the acceptor of the bill, and yet the principle was fully recognised, that it wrs competent for the defendant to shew that the consideration of the indorsement was to compound, or stifle a prosecution for a criminal act, and that this would be a sufficient defence to defeat the plaintiff's action.

So in the case of Mead v. Young,a which also was an action by the indorsee of a bill of exchange against the acceptor, and on which the indorsement had been forged, it was held that the indorsee, though an innocent holder, for a valuable consideration, could not. recover against the ne-ceplor. The case of Strong v. Tompkins,b is to the same effect. In that case, a deputy sheriff, instead of taking bail from the person whom he had arrested, look from him a negotiable note, which he indorsed to the deputy. In an action by the deputy as indorsee, against the maker of the note, it was determined, that the transfer to the deputy was illegal and void, and that this was a good defence to an action against the maker. The express language of the Court is, “that the plaintiff had no right of property in the note, that he was not the legal holder, because the assignment to him was a nullity, and that he had no more right to sue the defendant, than if the indorsement had been forged.” The reason why the deputy acquired no right of property or of action, by virtue of the indorsement was, because it was unlawful for him to take a note by color of his office. In that case, the note was good as between the maker and payee, because nothing to the contrary is intimated, though it was held that the assignment was a nullity. If from these cases, the one at bar can be distinguised in principle, I confess that I am unable to discover the distinction.

In the case cited from Term Reports, the indorsement was held to be void, because it was forged. In the case from Campbell, it'was held to be void, if the consideration of the indorsement had been the composition of a crime, or the stifling of a criminal prosecution. In the case from Johnson, because it was unlawful for the deputy sheriff to take the note by color of his office. In all of them, the ground and principle of decision is. that the indorsement of a transfer was void, because the act of the indorsee in obtaining the transfer was unlawful. In all these cases, the note or bills were good in their creation, and the in dorsement alone was void. So in the case under consideration, the composition of a crime, or the stifling a prosecution for felony, was an unlawful act, and the assignment of the bond on this consideration, was a nullity, and conveyed to the plaintiff no right, of property or of action. Polen, the assignor, parted with no right; he may yet sue the obligor and recover the debt, as though the bond had never been assigned. I am satisfied, that both on reason and authority, the judgment of the County Court should be affirmed; and with me, Judges Collies and White concur.

By JUDGE COLLIER.

In the opinion delivered by me, in the eases of Carrington v. Caller., and Meggison v. Holder & Hill,a it is stated upon authority, that a Court of justice will not lend its aid to the enforcement of a contract, corrupted by political taint. That rule I consider decisive of this caso, and proves that the plaintiff has no just cause of action. The compositon of a felony, all admit, is against the policy of our laws, and cannot be the consideration of a contract; but it is attempted to distinguish between Ihe illegality of the consideration, where it is set up as a defence between the parties to the contract, and where it is done by a stranger against one of the parties. The justness of this distinction, may bo best tested by examining the principle of the rule itself. The object of the law is to repress vice, and advance the welfare of society, and in a measure to effect that end, it denounces as invalid, every contract which thwarts the policy of the State.b The object of the rule being then, advantage to the public, its usefulness it is apprehended would be greatly impaired, by limiting its operation, to the enforcement of a contract between the immediate parties to it. It would certainly be more compatible with the general analogies of the law, which extends the influence of a rule, to the reason which sustains it, for the tribunals of justice to withhold their assistance, whenever the party invoking it, requires the aid of the illegal transaction to establish his case. And short of this, authority has not prescribed a limitation to the rule.c The plaintiff cannot claim the benefit of limitation, because he deduces his title to sue through an indorsement, the consideration of which, is illegal and forbidden.

In Hall v. Miller,a it is determined that no right can ^er^vet^ under any contract, made in express opposition to the laws of the place where it is made. The contract, here attempted to be enforced, is confessedly opposed to our laws, and if it passed no right, it would be a solecism to suppose, that there was a subsisting remedy for its enforcement. In Lowes and another, v. Mazzeredo and others,b the plaintiffs as indorsees, brought their action against the defendants, as acceptors of a bill of exchange; the bill was drawn by one G. Lowes, and indorsed to Sir M. 11., and by him to Ambrose, and then to the plaintiffs. The defence was usury in the first indorsement, and which was proved. Lord Ellenborough was of opinion, that the plaintiffs were not entitled to recover upon the bill, since they were obliged to claim through an indorsement, which had been vitiated by usury. Upon the counsel for the plaintiffs insisting upon the case of Parr v. Eliason,c his lordship permitted the plaintiff to take verdict, subject to a motion to enter a nonsuit. A rule nisi having been obtained and cause shewn, the Court were of opinion, that the case of Parr v. Eliason, was distinguished from this, and might be supported upon other grounds, and that the indorsement was entirely avoided by the statute of usury.

There is an obvious conflict between the case last cited, and that of Littell v. Hord, noticed in the opinion of the majority. The former case is founded upon the rule, that Courts are not open to enforce a contract, originating in a source foul or illegal. The latter maintains the propriety of its enforcement, when not objected to by a party to it. And it is indisputably clear, if it be true that no rights are derived under an illegal contract, that Lowes v. Mazzeredo, is the better authority, and that Littell v. Ilord, entirely mistakes the principle on which illegal contracts are held void. While the composition of a felony is admitted to he an illegal consideration, it is declared by a majority of the Court to be the law, that as both the contracting parties are equally guilty, the transaction will not be investigated for the benefit of cither; but the party injured, must resort to his action for an indemnity. If this proposition be just, then contracts in themselves illegal and fraudulent, are to be onforc.ed, and Courts of jus tice aro to refuse to entertain defences alleging these this would be strange; it is nevertheless a necessary ■sequence. The proposition gains no aid by the application of the maxims, ex turpi causa non oritur actio, and in pari delicto melior est conditio defendentis, which been quoted as sustaining it; the application of these, prove it to be not well founded.

I do not feel myself called on to give this case a more extended examination; the doctrine to the consideration of which it invites, was very fully gone into in Carrington v. Caller, and Meggison v. Holder & Hill, and the authorities commented on by the majority, furnish a sufficient antidote to the prevalence of the legal tenets advanced in their opinion. Entertaining these views, it is with great deference that I avail myself of the remark, that I shall not consider myself concluded by the opinion of the majority, when an analogous case shall come before this Court for revision.

Reversed and rendered.

8 John. R. 70.

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7 John R. 159.

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7 John. R. 426.

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1 Camp. R. 45.

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4 D. &. E. 30.

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Harden R.

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15 John. R. 44.

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1 Stewart R.597arti

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1 Camp. R. 45.

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4 Term R. R. 20.

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8 John. R. 76.

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2 Stewart’s R.175.

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11 Wheaton 258 4 Pick Dedham Bank v. Chickering et al.

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7 Taunt, 246. [] Serg. & Swan v. Scott, See also Scott. See also Chitty on Bills Ed. 1839, p. 87.

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5 Har fc J 193, ‘ '

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1 Starkie 385.

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1 East.92.