Perry v. United States School Furniture Co.

83 N.E. 444, 232 Ill. 101

• Court: Illinois Supreme Court
• Decided: December 17, 1907
• Status: Published

Opinion

Mr. Justice Farmer

delivered the opinion of the court:

That the agreement between Loughlin and the United States company out of which the indebtedness to Loughlin originally accrued was in violation of the Anti-trust act, and therefore illegal, cannot be denied, and is, in fact, not questioned by the appellants. Their contention is that, the claim having been reduced to judgment, the American company and the other individual defendants cannot be heard to attack the validity of the judgment unless it be proven that it was procured through the fraud and collusion of Loughlin and the United States company, and it is denied any such proof was made. There was no answer filed to any portion of the bill. The pleas were pure pleas and are to be considered as admitting the allegations of the bill. Gage v. Smith, 142 Ill. 191; 16 Ency. of Pl. & Pr. 620.

Appellants contend that as the bill charges the American company took the property and assets of the United States company, paying no consideration therefor and with full knowledge of its indebtedness and liabilities, it was a fraudulent grantee of the judgment debtor, and as conclusively bound, so far as the property transferred or its proceeds is concerned, as the judgment debtor itself, unless, as before stated, the judgment was procured by the fraud and collusion of the parties. That this is correct as a general rule is sustained by the weight of authority. We do not think the proof shows there was any fraud or collusion, in fact, between the parties in procuring the judgment of Loughlin. The United States company pleaded to the suit of Loughlin against it, that the contract upon which Loughlin was seeking to recover was in violation of the Anti-trust law, and invalid. Mr. Phipps was called as a witness and testified he was the attorney for Loughlin, and that the United States company was represented by counsel at the trial. The witness testified that after he had proven his casé for Loughlin,- counsel for the United States company offered in evidence the agreement between Loughlin and said company referred to in the statement above; that he, as counsel for plaintiff, objected to its introduction until its execution had been first proven; that the court held the paper did not prove itself, and counsel for the United States company failing to make proof of its execution it was not received in evidence, and no further testimony being offered on the part of the defendant the court rendered judgment for Loughlin for the amount found due. This was not equivalent to a judgment by default. Nor do we think the proof establishes actual fraud and collusion which would subject the judgment to collateral attack by a transferee of the judgment debtor on that account.

The question then arises whether appellees may, under any principle of law, avail themselves of the defense set up in their pleas. The averments of the pleas that the indebtedness to Loughlin accrued by virtue of 9. contract that was in violation of law and illegal were established by the evidence. The suit of Loughlin to recover upon the illegal contract could have been defeated if counsel for defendant had been prepared, at the trial, to make the proof. The unlawful claim haying passed into judgment, the question then arises, will a court of equity lend its aid to the judgment creditor to enforce its collection in the manner here sought?

The practice does not permit demurrers to pleas to bills in chancery. If the complainant in the bill thinks the plea insufficient, instead of demurring he has it set down for argument as to its sufficiency. By doing this he admits the truth of the matters averred in the plea but denies they are sufficient, in law, to bar the relief sought. If the plea is held good he may then reply to it denying the truth of its allegations. If he does not reply, a decree will be entered dismissing the bill. (2 Daniell’s Ch. Pr. 795; 16 Ency. of Pl. & Pr. 620-622.) We understand the rule to be, that by replying to the plea a party waives his objections to its sufficiency and admits the plea to be good but denies its truth. The pleas here" put in issue the question whether the judgment sought to be collected out of the property and assets of the American company and its individual co-defendants was obtained upon a contract that was in violation of law, and invalid. There can be no question that the judgment was a valid and binding judgment against the United States company, and that as against it Loughlin had a right to pursue his remedy at law to secure its payment and satisfaction, but a court of equity will not lend its aid in the enforcement of claims or rights which arise out of contracts that are contrary to the public policy of the State. In Harding v. American Glucose Co. 182 Ill. 551, this court said (p. 616) : “The public policy of a State is to be found in its statutes, and when they have not directly spoken, then in the decisions of the courts and in the constant practice of government officials. When the legislature speaks upon a subject upon which it has the constitutional power to legislate, public policy is what the statute passed by it indicates. (United States v. Freight Ass. 166 U. S. 290.) The public policy of the State of Illinois has always been against trusts and combinations organized for the purpose of suppressing competition and creating monopoly.”

It is not from any tender consideration for parties whose relations to the illegal transactions were such as the allegations of the bill show those- of the American company to have been that equity refuses to lend its aid. The grounds of such refusal by a court of equity were well stated in Minzeheimer v. Doolittle, 60 N. J. Eq. 394, where it was said: “But the complete answer to the complainants is that the court’s refusal to act does not rest upon regard for the defendants. It is based on the unwillingness of the court to use the powers which were granted for the furtherance of lawful ends, in aiding schemes the nature of which is condemned by the public policy of the State,—a policy which holds a prominent place even in our constitution.” Upon this subject this court said in Goodrich v. Tenney, 144 Ill. 422, on page 430: “The maxim ex turpi contractu non oritur actio applies in all such cases, and neither party, if in pari delicto, can have assistance from courts of justice in enforcing the contract. And the objection may be made by a party in pari delicto, for the defense is not allowed because the party raising the objection is entitled to the relief, but upon principles of public policy and to conserve the public welfare.” The same rule was announced in Crichfield v. Bermudez Paving Co. 174 Ill. 466.

The pleadings here put in issue the legality of Loughlin’s claim against the United States company, and not merely whether the judgment was obtained by fraud of the parties. It will be observed the plea does not aver that the parties to the judgment were guilty of any fraud, in fact, in its procurement, but the averment is, in substance, that the failure of the United States company to exercise greater diligence in its defense and permitting judgment to go against it under the circumstances set out in the plea was a fraud upon appellees. This averment the Appellate Court held to be surplusage, and we are of opinion the defense to the bill interposed by .the pleas was not dependent upon this averment or whether the parties were guilty of any fraud, in fact, in the procurement of the judgment. The proofs clearly show that claim was founded upon a contract that was in violation of law and contrary to the public policy of the State. In such cases equity will not afford relief.

It is contended by appellants that the bonds sued on by Loughlin were issued by the United States company after all its contracts with its constituent companies had either expired or been canceled and after the judgment in the quo warranto proceeding, and that the United States company at that time was not an unlawful combination. This position we think untenable even if it be true (which does not clearly appear from the evidence) that the United States company was not an unlawful combination at the time the bonds were issued. The bonds issued to Loughlin in February, 1897, were in renewal of bonds that had matured, and those bonds had been issued to him for merchandise sold and money loaned under the unlawful agreement. This could not have the effect of relieving the-transaction of the taint of illegality. Embrey v. Jemison, 131 U. S. 336.

We are óf opinion the judgment of the Appellate Court was correct, and the judgment is affirmed.

Judgment affirmed.